Federal Reserve to Hold Near-Zero Interest Rates, QE3 Not Ruled Out
August 9th, 2011At the Federal Reserve’s Open Market Committee (FOMC) meeting today, the board of governors agreed to hold interest rates at historic lows, as they have been since December of 2008. This would allow cheap credit to flow to bankers in the hopes of propping up an economy that seems to be trending downward.
In a 7-3 vote, interest rates would be held at 0-0.25%, in an effort to sooth concerns of a global economic meltdown in the face of the US and European debt crises. While fears of another round of quantitative easing were put to rest today, the ever present threat of doing so by the Fed remains, and stocks took a brief tumble today before recovering. Gold rose again today, and is on pace to hit $1,750/oz before much longer.
The decision comes as economic growth has slowed this year, prompting concerns of deflation, which would trigger another round of Treasury bond purchases by the Federal Reserve, as is usually the case. The drop-off has led Reuters to publish a poll that shows a 25% of another recession in the immediate future, a troubling indicator.
The three dissenters during the vote were Richard Fisher of the Dallas bank, Narayana Kocherlakota of the Minneapolis bank, and Charles Plosser of the Philadelphia bank, who has gained a reputation as one of the more pragmatic governors on the board as of late.
