DJIA Courtesy: Yahoo Finance
What did he say?
- The Fed has decided to buy $ 40 billion worth of Mortgage Backed Securities every month continuously, until the dire unemployment situation improves
- This will drive down mortgage rates and encourage more home buying
- This will also drive mortgage investors to corporate bonds thereby increasing investments in other areas of the economy as well
What does this mean for the common man?
- More jobs? Maybe! Please refer to Case 1 on Monetary Policy to understand how interest rates are related to employment.
- A stock market bonanza? The stock market is very fickle. The benefit will last only until the next piece of news arrives. But we have already seen a 200pt improvement today and that is very good. With today's statement, the Fed has signaled to the market that it is willing to take bold steps to improve the economy and the market liked it.
