In March, the Fed launched a bold $1.2 trillion effort to drive down interest rates to try to revive lending and get Americans to spend more freely again. It said it would spend up to $300 billion to buy long-term government bonds over six months and boost its purchases of mortgage securities. So far, the Fed has bought about $177.5 billion in Treasury bonds.
The Fed is on track to buy up to $1.25 trillion worth of securities issued by Fannie Mae and Freddie Mac by the end of this year or early next year. Nearly $456 billion worth of those securities have been purchased.
But slowing down the purchases carries risk, including that rates on mortgages and government debt could rise more than expected, which could hurt the economy's prospects for emerging from recession, economists said.
A recent run-up in rates on mortgages and Treasury securities, if prolonged, could choke off prospects for an economic recovery. Some of those fears were eased last week, when rates on 30-year mortgages dipped to 5.38 percent after a string of weekly increases.
A fresh sign of the economy's improvement emerged Wednesday. Orders placed with factories for costly goods grew 1.8 percent for the second straight month in May, and a barometer of business investment posted its largest gain in nearly five years, the Commerce Department reported.
Another government report showed that new-home sales dipped slightly in May, a sign the housing market's recovery will be gradual. Sales of previously owned homes nudged up in May, according to a report Tuesday from the National Association of Realtors.
Meanwhile, the Fed is all but certain to hold its key bank lending rate at a record low between zero and 0.25 percent when the meeting concludes and probably through the rest of this year, economists said.
That means commercial banks' prime lending rate, used to peg rates on home equity loans, certain credit cards and other consumer loans, will stay around 3.25 percent, the lowest in decades.
With the Fed pumping in so much money, it is a surprise that the DJIA has NOT sky rocketed but is hovering around around 8,500 points.
Sooner or later, hyperinflation is going to set in the US and things might get ugly. There's always the fear that the US Dollar might suffer a significant devaluation in the future.
Rgds
Maybe this will be the end of US supremacy at this turn of the 22th century.
It used to be Greek->Romans->Ottoman Empire->Britain->US . Next in line will be without doubt China.
Every kingdom is destined to rise and fall with time.