The Federal Reserve (Fed) is set to end its quantitative easing programme end of this month. The asset-purchase so far has added $ 1.66 trillion to the Fed`s balance sheet.
In the Federal Open Market Committee (FOMC) press release, it was stated that labour market conditions improved "with solid gains and lower unemployment rates." Everything else seems in place except the housing market which recovery is still sluggish.
Slowness in the global economy and low inflation levels are key risks the Fed needs to combat. Ending quantitative easing (QE) means pumping less cheap money into the US economy, slowing down recovery and driving inflation rates down.
Narayana Kocherlakota, the Minneapolis Fed President dissented "in light of continued sluggishness in the inflation outlook and the recent slide in market-based measures of longer-term inflation expectations, the Committee should commit to keeping the current target range for the federal funds rate at least until the one-to-two-year ahead inflation outlook has returned to 2 percent and should continue the asset purchase program at its current level."
Clarence Lim, a trading associate remarked that the decision to end QE does not make sense although he acknowledges "QE is no longer the fad".
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