Fed Follows Through with Quantitative Easing Program

The two day Federal Reserve Open Market Committee meeting ended today.  Fed official press release linked below.

The majority of monetary policy programs stayed the same.  Fed Funds rate will continue to be held at a record low of 0 – 1/4% for an “extended period.”  The programs to purchase up to $1.25 trillion of agency, GSE (Freddie, Fannie, etc), mortgage-backed securities and up to $200 billion of agency, GSE, debt will continue until the end of 2009 as originally stated in the March 18th announcement.

There has been a change in the program regarding the $300 billion of US Department of Treasury Debt to be purchased, essentially debt monetization.  “…the Federal Reserve is in the process of buying $300 billion of Treasury securities. To promote a smooth transition in markets as these purchases of Treasury securities are completed, the Committee has decided to gradually slow the pace of these transactions and anticipates that the full amount will be purchased by the end of October.” 

The purchase of $300 billion Treasuries was originally planned to end by September, but now will be extended an extra month.  They word the addition of one month to the Treasury purchase program as follows, “the Committee has decided to gradually slow the pace of these transactions and anticipates that the full amount will be purchased by the end of October.”

The statement then ends with the usual reassurance the Committee will continue to monitor and evaluate its actions based on the changes occurring in the markets and will adjust accordingly.

Federal Reserve Open Market Committee Monetary Policy Announcement Aug 12 2009

Bloomberg Article