The United States central bank has announced that it is launching a third round of quantitative easing. Central bank leader Benjamin Bernanke hopes that the latest stimulus measures will help the United States create new jobs and fuel economic growth.
A number of experts throughout the country are already projecting that the latest round of quantitative easing may be the largest yet. Some estimates predict that the new stimulus measures will reach nearly $2 trillion in bond purchases. This is an indication that the central bank feels the United States economy is in further need of assistance.
The newest round of quantitative easing isn’t as aggressive as many investors expected. Bernanke said that the Fed will purchase $40 billion of mortgage backed securities every month. That is less than half what the central bank spent each month during the last round of quantitative easing. However, the Fed has clearly stated that it will be taking additional measures if things don’t improve considerably in the near future.
The central bank has given no indication as to how far it will increase spending in the future. Reuters economists project that it could slightly surpass the spending of the first round of quantitative easing, reaching approximately $1.75 trillion.
Economists feel that the promises are a clear indication that the central bank is committed to fixing the problems facing the economy. However, many skeptics said that the Federal Reserve is limited in its ability to overcome many of the financial challenges facing the United States.
The fiscal cliff is the biggest challenge facing the United States at this time. Many experts are concerned that lawmakers are going to make drastic cuts to the national budget, which could force the United States back into a recession or even a depression. Many experts argue that no amount of monetary stimulus on the part of the Federal Reserve will be able to solve those challenges.
The United States could be teetering on the edge of another financial crisis. The unemployment rate is over 8% and the labor force participation rate is the lowest in 30 years. Further cuts to the national budget will only exacerbate the economic crisis. The real question on everyone’s minds is whether or not the central bank will be able to keep these problems in check. Only time will tell.