News / USA

US Fed Policies Send Stocks to Record Highs

US Central Bank Stays Course on Monetary Stimulusi
X
September 19, 2013 12:24 AM
U.S. stock prices reached new highs Wednesday after the U.S. Federal Reserve said it would stay the course on efforts to stimulate the economy. And that rally could continue, despite the central bank's conclusion that the U.S. economic recovery still has a way to go before it becomes fully sustainable. As Mil Arcega reports, many economists were expecting the Fed to start scaling back its bond purchases this month as the economy recovers from the worst recession in decades.
U.S. stock prices reached new highs Wednesday after the U.S. Federal Reserve said it would stay the course on efforts to stimulate the economy. And that rally could continue, despite the central bank's conclusion that the U.S. economic recovery still has a way to go before it becomes fully sustainable. Many economists were expecting the Fed to start scaling back its bond purchases this month as the economy recovers from the worst recession in decades.

Top central bank officials concluded two days of meetings Wednesday by doing something completely unexpected - nothing.  

Federal Reserve Chairman Ben Bernanke summed up their findings - saying there would be no immediate change.

“As you already know from our statement, the committee decided today to keep the target range for the federal funds rate at zero to one-fourth percent and to make no change in either its asset purchase programs or its forward guidance regarding the federal funds rate target," said Bernanke.

The Federal Reserve has been buying $85 billion in bonds a month to stimulate the economy by keeping interest rates low.  

Financial markets reacted almost instantly - sending stock prices sharply higher.

Not surprising says economics professor Steven Kyle.  He spoke to VOA via Skype.

“Well, in the stock market, they’re happy because that means that long-term interest rates will stay low.  That’s a good thing for stocks, and they can keep the party going a while longer," said Kyle.

But the decision to maintain the stimulus package confirms that the U.S. economy is not as robust as many hoped.  Bernanke says the job market remains weak.

“Notably, at 7.3 percent, the unemployment rate remains well above acceptable levels.  Long-term unemployment and underemployment remain high," he said.
 
Economist Joseph Gagnon at the Peterson Institute had predicted the tapering would not happen this month, partly because of intense market speculation, and partly because of the tepid economy.

“Things are not looking as good as they were three months ago, the last time they did a forecast.  And part of that is the higher interest rates, which have risen because of this talk about tapering itself, is making the economy worse," said Gagnon.

Some say it’s not a question of when the Fed will start tapering but by how much.

That could be more difficult given expectations that Bernanke will step down as Fed chairman when his term ends in January - says the Concord Coalition's Robert Bixby.

“It’s going to be a difficult job because you’re essentially unwinding a policy that somebody put in place and that’s a difficult challenge," said Bixby.

Market experts say a more immediate problem may not be the size of the taper but whether Congress is able to agree on government spending levels or the size of the U.S. debt when budget negotiations begin later this month.

You May Like

At Khmer Rouge Court, Long-Awaited Verdict Approaches

First phase of trial, which is coming to an end, has focused on forced exodus of Phnom Penh in 1975 - and now many are hopeful justice will be served More

Video When Fighting Eases, Gazans Line Up at Bakeries

When there is a lull in the conflict, residents who have been hunkered down in their apartments rush out to stock up on food and other necessities More

Video Information War Rages Alongside Real One in Ukraine

Downing of Malaysian airliner, allegations of cross-border shelling move information war in war-torn country to a new level More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Information War Rages Alongside Real One in Ukrainei
X
Al Pessin
July 31, 2014 8:13 PM
The downing of the Malaysian airliner two weeks ago, and allegations that Russians are shelling Ukrainian troops across the border, have moved the information war swirling around the Ukrainian conflict to a new level. VOA's Al Pessin reports from Kyiv.
Video

Video Information War Rages Alongside Real One in Ukraine

The downing of the Malaysian airliner two weeks ago, and allegations that Russians are shelling Ukrainian troops across the border, have moved the information war swirling around the Ukrainian conflict to a new level. VOA's Al Pessin reports from Kyiv.
Video

Video When Fighting Eases, Gazans Line Up at Bakeries

When there is a lull in the conflict in Gaza, residents who have been hunkered down in their apartments rush out to stock up on food and other necessities. Probably the most important destination is the local bakery. VOA’s Scott Bobb reports from Gaza City.
Video

Video US-Funded Program Offers Honduran Children Alternative to Illegal Immigration

President Obama and Central American leaders recently agreed to come up with a plan to address poverty and crime in the region that is fueling the surge of young migrants trying to illegally enter the United States. VOA’s Brian Padden looks at one such program in Honduras - funded in part by the United States - which gives street kids not only food and safety but a chance for a better life without, crossing the border.
Video

Video 'Fab Lab' Igniting Revolution in Kenya

The University of Nairobi’s Science and Technology Park is banking on 3-D prototyping to spark a manufacturing revolution in the country. Lenny Ruvaga has more for from Nairobi's so-called “FabLab” for VOA.
Video

Video Gazans in Shelled School Sought Shelter

Israel's air and ground assault against Hamas-led fighters in Gaza has forced many Palestinians to flee their homes, seeking safety. But safe places are hard to find, as VOA’s Scott Bobb reports from Jabaliya.
Video

Video Rapid Spread of Ebola in West Africa Prompts Global Alert

Across West Africa, health officials are struggling to keep up with what the World Health Organization describes as the worst ebola outbreak on record. The virus has killed hundreds of people this year. U.S. President Barack Obama and other world leaders are watching the developments closely as they weigh what actions, if any, are needed to help contain the disease.
Video

Video Michelle Obama: Young Africans Need to Embrace Women's Rights

U.S. first lady Michelle Obama urged some of Africa's best and brightest to advocate for women's rights in their home countries. As VOA's Pam Dockins explains, Obama spoke to some 500 participants of the Young African Leaders Initiative, a six-week U.S.-based training and development program.
Video

Video Immigrant Influx on Texas Border Heats Up Political Debate

Immigrants from Central America continue to cross the U.S.-Mexico border in south Texas, seeking asylum in the United States, as officials grapple with ways to deal with the problem and provide shelter for thousands of minors among the illegal border crossers. As VOA's Greg Flakus reports from Houston, the issue is complicated by internal U.S. politics and U.S. relations with the troubled nations that immigrants are fleeing.
Video

Video Study: Latino Students Most Segregated in California

Even though legal school segregation ended in the United States 60 years ago, one study finds segregation still occurs in the U.S. based on income and race. The University of California Los Angeles Civil Rights Project finds that students in California are more segregated by race than ever before, especially Latinos. Elizabeth Lee reports for VOA from Los Angeles.

AppleAndroid