Get those printing presses rolling

US Fed has decided on some serious quantative easing in an attempt to revitalise an economic recovery that the central bank admitted was turning out “more modest” than expected. It said it would pump new money into the markets at a rate equivalent to about $200bn a year, and it left the duration of its efforts open-ended. Quantitative easing (QE) is the central bank practice of printing new money and using it to buy bonds on the open market. It is designed to push market interest rates lower when traditional tools, such as official interest rates, have been exhausted. The Fed kept rates at 0 to 0.25 per cent, where they have been since December 2008. The intensity of the debate over whether the Fed should resume quantitative easing increased after the July unemployment figures which showed a 131,000 drop in the number of jobs overall. This material is very appropriate for Unit 7 of the A2 course – Macro Policies. Click here to view BBC news. Below is a cartoon showing Ben Bernanke (US Fed Chairman) using a “helicopter drop” of money into the economy to fight deflation.

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