The Federal Reserve’s interest rate-setting committee wraps up a two-day meeting today. This afternoon, it will announce its next steps in shoring up the economy.
The Fed has been pumping money into the economy for the past four years, buying $85 billion worth of U.S. bonds each month. The thinking is, when there’s that much cash sloshing around, interest rates will stay low. That will encourage consumers to buy houses and cars.
Len Blum, managing partner at Westwood Capital, expects the Fed to just continue what it’s doing.
“The status quo right now probably makes sense,” he says. “You know, there just seems to be more risk to not continuing than continuing.”
But don’t expect the Fed to step on the gas any more to stimulate economic growth. Former Fed economist Ken Kuttner doesn’t think the Fed’s Open Market Committee will try to push interest rates any lower because that would encourage risk-taking, which could lead to another bubble.
“I don’t think people on the committee are actually using the word bubble,” he explains. “Excessive risk taking is sort of a code word for bubble.”
Kuttner says the Fed is also worried that financial markets will get too dependent on it, if it steps up the stimulus. Forgetting how to operate on their own, without government help.
Audio Extra: Chris Low, chief economist with FTN Financial, shares his predictions on what the Federal Reserve will do next.
If you’re a member of your local public radio station, we thank you — because your support helps those stations keep programs like Marketplace on the air. But for Marketplace to continue to grow, we need additional investment from those who care most about what we do: superfans like you.
Your donation — as little as $5 — helps us create more content that matters to you and your community, and to reach more people where they are – whether that’s radio, podcasts or online.
When you contribute directly to Marketplace, you become a partner in that mission: someone who understands that when we all get smarter, everybody wins.