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Published On: Thu, Sep 13th, 2012

Federal Reserve announced QE3, spending billions on mortgages

While the Federal Reserve lowered its forecast for growth slightly this year, the central bank sees the economy improving somewhat in 2013.

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The 19 members of the Federal Open Market Committee predict the economy will grow only 1.7% to 2% in 2012 — a weak forecast that led the Fed to take dramatic action to boost the U.S. economy earlier Thursday.

Ben Bernanke and the Fed have officially announced launching QE3 as the central bank sees modest improvement in growth next year. In 2013, the Fed expects the economy to grow between 2.5% to 3%.

“The weak job market should concern every American. It imposes hardship on people and a waste of human skills and talents,” Bernanke said in a press conference later Thursday.

Last week, the government’s jobs report showed hiring slowed substantially in August and the labor force shrank.

Earlier Thursday, the Fed announced it plans to buy $40 billion a month in mortgage-backed securities, in a controversial policy known as QE3. It also said it expects the economy to be weak enough to warrant “exceptionally low” interest rates until at least mid-2015.

Bernanke also admitted that the Fed alone is not strong enough to fix the job market.

“I want to be clear — While I think we can make a meaningful and significant contribution to reducing this problem, we can’t solve it. We don’t have tools that are strong enough to solve the unemployment problem,” he said.

Banks are sitting on $1.6 trillion in reserves and credit standards remain tight following the financial crisis. Households continue to pay down debt, and are in no hurry to ramp up their spending.

“We’re looking for policymakers in other areas to do their part,” Bernanke said at the press conference. “We’ll do our part and we’ll try to make sure unemployment moves in the right direction but we can’t solve this problem by ourselves.”

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About the Author

- Writer and Co-Founder of The Global Dispatch, Brandon has been covering news, offering commentary for years, beginning professionally in 2003 on Crazed Fanboy before expanding into other blogs and sites. Appearing on several radio shows, Brandon has hosted Dispatch Radio, written his first novel (The Rise of the Templar) and completed the three years Global University program in Ministerial Studies to be a pastor. To Contact Brandon email [email protected] ATTN: BRANDON

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