Fed To Pump Billions Into The Economy In A Bid To Stimulate Demand


Fed to pump billions into the economy in a bid to stimulate demandThe Federal Reserve announced on Nov. 3 that it will buy long-term Treasury bonds over the next several months in order to stimulate the faltering economy. 

The central bank hopes that pumping as much as $600 billion — but potentially even more than that — into the economy will increase the pace of output recovery and job creation. The general consensus has it that the previous rounds of monetary loosening in the form of interest rate cuts have failed to do the job. The rates are now close to zero.

However, not everyone shares the Fed's belief that the move will resuscitate the economy. In fact, some people have expressed concerns about the possibility of a runaway inflation that may result from flooding the market with excess money.

Paul Ashworth, senior U.S. economist with Capitol Economics, told CNN that he didn't believe the decision will make any difference at all.

"This is a slippery slope. Once you're on it, it's very hard to get off," he added.

In response to the announcement, the stock market had a choppy session on Nov. 3, followed by an early rally on Nov. 4, further underscoring the nation's economic and financial volatility.

Due to these persistent uncertainties, some experts have suggested buying gold as way to protect assets from depreciation. 

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