US Fed’s Latest Money Boost

Currency markets have had a bit of ricochet activity as the US dollar fell against all major currencies – 4.2 per cent against the Euro, and 3.9 per cent against the British Pound.  This ended the dollar’s recent rally – it had risen by more than 2 per cent against major currencies this year.  On Standard & Poor’s 500, there was an increase of 1.6 per cent.

Why?

Because the US Federal Reserve has decided to do that the Bank of England did a few weeks back – begin injecting new money into the market.  The Fed’s total comes to a huge $1.2 trillion, and many are wondering – is it really necessary?

After all, they themselves have said that deflation is no longer as large a risk as it was, and that inflation is only slightly above target.  But they are keen to use all available ammunition to fight recession and get it kicked as soon as possible.

Investors were apparently shocked by the news.  Some are saying that the Fed wants to pep up the balance sheets by buying government debts – they have already been buying private – so that confidence doesn’t decrease.

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