More from the USA pop press on the FED....$85 bill per month until the cows come home...
Yellen pointed to erratic US budget policy as one source of weakness in the recovery. "I expect that discretionary fiscal policy will continue to be a headwind for the recovery for some time, instead of the tailwind it has been in the past," she said. In response to the deep financial crisis and recession of 2007-2009, the Fed lowered interest rates to effectively zero and bought over $US2 trillion in mortgage and Treasury securities in an effort to keep down long-term interest rates. It began a new, open-ended round of $US85 billion monthly bond purchases in September. Yellen argued that the primary cause of elevated unemployment is a shortage of demand due to the ebb and flow of the business cycle, not structural factors. That suggests monetary policy can be helpful to offset the labor market's troubles. Long-term unemployment is a serious problem not only for those affected but also for the economy as a whole, Yellen said, since it could hurt the nation's growth potential. Some analysts worry the Fed's stimulus policies will spark future inflation, but the central bank maintains it has all the tools it needs to remove liquidity from the financial system when the time comes. Policymakers do not think that is any time soon. They have vowed to keep purchasing assets as long as the US employment outlook fails to make substantial improvement, and also to keep rates near zero until the unemployment rate falls to 6.5 per cent, as long as inflation remains under control.
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