The United States government and the Federal Reserve have implemented stimulus measures in response to the coronavirus epidemic in order to stimulate the economy and keep money moving from companies to employees and back to enterprises.
Federal Reserve To Contribute Stimulus Programs for Americans
In a recently published article in MARCA, the Federal Reserve is able to influence the economy of the United States by acquiring billions of dollars worth of bonds each month. However, this raises the cost of living, which is a major issue.
It was previously determined in November that the Federal Reserve will reduce its monthly bond-buying from $120 billion to $105 billion and eventually down to $ 90bn dollars. In January, they’ll only buy $60 billion worth of government and mortgage securities, a $30 billion monthly reduction.
To put it another way, this indicates that the Federal Reserve’s stimulus program will be entirely phased down by March 2020. Even while some states are still handing out stimulus cheques to their populations, the federal government’s stimulus program has ended. Following suit, the Federal Reserve will reduce its bond-buying stimulus program sooner than originally anticipated.
Why Stimulus Check is Winding Down in March?
This shift in strategy is mostly motivated by an increase in inflation. Because of concerns that inflation might stagnate at a high pace, the Federal Reserve is decelerating stimulus swiftly, in contrast to their customary method of gradual adjustment.
Seema Shah, the chief strategist at Principal Global Investors, said “The Fed apparently just woke up to the inflationary pressures consuming the US economy. With Consumer Price Inflation in touching distance of 7 percent, it should be of no surprise to see the Fed accelerating tapering.
Kenneth Rosen, the housing economist at the University of California, added also that “If they could wave a wand, I think they would want to stop it altogether, because it’s not needed in the economy at this point.”