Fed Announces Increase of $45 Billion in Monthly Treasury Purchases

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CNBC: Fed to Keep Easing, Sets Target for Rates (12 Dec 2012)

The final Fed’s Open Market Committee(FOMC) of 2012 saw the Federal Reserve Chairman, Ben Bernanke, announcing additional bond-buying by the Federal Reserve to the tune of $45 billion per month with no end in sight.

Economists had been expecting the Federal Reserve to accelerate its debt buying program, known as quantitative easing, to the tune of another $45 billion a month, and the central bank came through.

It also marked the end of Operation Twist which was bond buying but did not expand the Fed’s balance sheet.

The latest round of bond buying will expand the Fed’s balance sheet considerably.

Coupled with its move to buy $40 billion of mortgage-backed securities a month(September’s QE3), that would bring the Fed balance sheet expansion to another trillion dollars or so in 2013 and $4 trillion overall.

In case we feel indifferent to a trillion dollars, watch this.

Bernanke intends to increase easing if the economy is threatened by the ‘fiscal cliff’.

Bernanke said even the Fed’s massive balance sheet expansion wouldn’t be enough to stave off the effects, though the Fed may accelerate its asset purchases should cliff take effect.

However, the real and more dire cliff facing the US is its enormous debt which requires money-printing in increasing amounts to service. The trend forward therefore is looking to be more and more easing by the Fed.

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