The Federal Reserve buys debt to help improve the economy. Federal Reserve officials made the decision to reinvest principal payments on mortgage holdings into long-term Treasury securities. The fed is attempting to spur growth and keep the economy from contracting. This move by the fed shows they are more than willing to move or take action to help improve the economy. The fed also announced that it would keep interest rates at zero for an “extended period”.
Poor employment figures, housing data and GDP data recently have lead many to believe that the economy may not be getting stronger and is still relatively fragile. New numbers in the medium term will help give a clearer picture on when the economy may begin to pick up steam. Improvements in corporate spending on equipment and software showed some positive economic news is occurring year over year and markets overseas were receptive to the feds move. But was this move enough and do markets need a clearer picture of when rates could change?