The Fed reinvests

In its rate decision today, the Federal Reserve held interest rates as expected, but announced it would reinvest in mortgage-backed securities, or, as Phil Flynn predicted in his energy report this morning, "the fearful Fed may just pump that cash back out there and buy more MBS or bonds to try to inspire some economic activity and maybe even some job creation."

Indeed, the Fed said that "economic recovery is likely to be more modest in the near term than had been anticipated" and said that, once again, economic conditions would warrant low rates "for an extended period." The lone dissenter from the decision was Thomas Hoenig, who said keeping low rates for an extended period was not warranted.

With a bleak economic picture it will be interesting to see when the Fed will actually begin to raise interest rates, a timetable that has been pushed back again and again over the last year as economic recovery has been slower than expected.

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