Fed Ends Stimulus Program With Economy Still On Shaky Ground

Fed Ends Stimulus Program With Economy Still On Shaky Ground

In this March 31, 2014 file photo, Federal Reserve Chair Janet Yellen speaks to community development professionals at the National Interagency Community Reinvestment Conference in Chicago. Yellen said Tuesday, April 15, 2014 that the largest U.S. banks might need to hold additional capital to withstand periods of financial stress. (AP Photo/Paul Beaty, File)
In this March 31, 2014 file photo, Federal Reserve Chair Janet Yellen speaks to community development professionals at the National Interagency Community Reinvestment Conference in Chicago. (AP Photo/Paul Beaty, File)

 

(The Huffington Post) – Janet Yellen and the Federal Reserve just declared the U.S. economy well enough to leave intensive care, though it is not yet the picture of health.

The Fed announced on Wednesday that it was ending a two-year stimulus program designed to keep interest rates low and boost the economy. The program — known as “quantitative easing,” or “QE3,” for the fact that it was the third round of such stimulus since the financial crisis — involved buying billions of dollars of bonds each month. The central bank has been cutting back on these purchases with every Fed meeting since December 2013. On Wednesday it said it was making its last such purchase this month.

In pulling away support for the economy, the Fed is taking a chance that recent signs of economic strength are more reliable than recent signs of weakness. On the one hand, unemployment has tumbled to 5.9 percent, the lowest in six years, and employers have added more than 200,000 jobs per month so far this year. GDP growth jumped at a 4.6 percent annualized rate in the second quarter. Gasoline prices are at their lowest in four years.

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