(By Rich Bieglmeier) After much speculation and a dramatic rise in stock prices, the Federal Reserve has launched QE3. The Committee agreed to" increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. "
While it is less than some had speculated, the central bank did not stamp an end date on when easing will expire. Instead, they left it open ended, essentially saying the Fed will keep on digitizing dollars until employment improves.
Additionally, Bennie and the Inkjets will continue its program to extend the average maturity of its holdings of securities through the end of the year. The bank will maintain its existing policy of "reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities."
In total, the Federal Reserve will purchase about $85 billion in securities each month through the end of 2012. At the same time, the bankers feel a federal funds rate at 0 to 1/4 is warranted through mid-2015.
To give stocks and commodities further juice and Wall Street the jones for more free money, the Federal Open Market Committee minute's included this carrot for the algorithms, "If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases (emphasis added), and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability."
Hello QE4, 5, 6…
Until maximum employment is met – however that is defined – investors can expect Ben Bernanke and Company to keep easin' on down the road, or until food and gas prices leave no money for consumers to buy the latest iPhone – whichever comes first.
iStock see no end in sight for quantitative easing as only one board member voted against it, Jeffrey M. Lacker. He only did so because he wanted to omit the mid-2015 language for the "exceptionally low levels for the federal funds rate."
Stocks jumped on the news, and so did gold and silver. With an open-ended policy, iStock feels that precious metals could end up being the biggest winners, and eventually poor to lower-middle class folks the biggest losers; especially elder savers who rely on a fixed income. They will be forced to make risky bets with their money to keep up with the cost of living.