Macroeconomic Situation in the U.S. Essay

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It continues to buy government securities to infuse more cash into the economy. "The target range for the federal funds rate at 0 to 1/4% and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. The amount of agency debt purchases, while somewhat less than the previously announced maximum of $200 billion, is consistent with the recent path of purchases and reflects the limited availability of agency debt" (Fed, 2009).

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Consumer credit card debt and rates of foreclosures remain high, so the Fed will likely keep interest rates at current levels, especially given the low risk of inflation. While this Fed seems wise, it cannot be forgotten that the housing market bubble and bust were partially due to low interest rates and increased access to credit to consumers with poor credit profiles. Unless employment increases, improvements in the stock market and consumer spending will not create a truly healthy economy with a sound ratio of savings to spending. Thus, the federal government must take action to stimulate long-term job growth, rather than merely engage in short-term stimulus incentives to increase consumer spending for cars and new homes......

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