Tapering tops the agenda at the Federal Reserve

Gigi Douban Sep 17, 2013
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Tapering tops the agenda at the Federal Reserve

Gigi Douban Sep 17, 2013
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The Federal Reserve Board gets together today for the first time since July. A lot of the buzz has been about whose name is going in the hat after Lawrence Summers pulled out of the running for chairman of the board. But there’s more.

The Fed has been buying $85 billion of bonds a month to push the economy along.  Experts say it’s helped. Slowly, says Stephen Oliner, an analyst at the American Enterprise Institute and former staffer at the Federal Reserve Board.

“A lot of that has come through housing market, housing prices and stock prices so that people feel wealthier and are willing to spend,” he says.

This week, the Fed might decide to taper that spending. And Oliner says it won’t be that big a deal. But how much recovery is enough before the feds cut stimulus spending?

“I think there’s still a lot of uncertainty about the strength of this recovery,” Oliner says.

The unemployment rate, for example, has fallen to 7.3 percent. But about 6 million people have dropped out of the labor force.

“They’re living with their parents now, their kids are dropping out of school early, they’re now on the disability insurance program,” says Michael Greenstone, who teaches economics at MIT.

Greenstone says the fed ought to consider these people too, as it tries to strengthen the jobs market.

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