Fed day is finally here with onlookers expecting the central bank to announce nothing less than a purchase amount of $500 billion. It’s important to keep in mind what the impact of the first phase has been. The purchase of $1.7 trillion in mortgage and government securities has stopped the housing market from falling and allowed mortgage holders the chance to restructure their own balance sheets at preferential rates. It also delivered a current annualized growth rate of 2% and by couching confidence that things would stop sliding helped prevent unemployment from a further acceleration. Today the Fed is challenged by a growth rate that won’t grow jobs enough and remains concerned by deflation. Today the U.S. economy is far-better positioned than at the onset of phase one of quantitative easing and that means that whatever the Fed does today, it will be aware that the outcome will be magnified in that a smaller and perhaps more targeted dose of medicine will go further in achieving its goals.
