US Government Shutdown Delays QE Tapering

The Federal Reserve Bank announced that they will continue to pump money into the United States economy until March of next year.

This news came after the government shutdown that took place due to a difference in Republican and Democratic views on healthcare funding.

The 800,000 government employees that were furloughed during the 16-day shutdown were not the only victims of the political crossfire, the economy took a major hit as well.

Major losses of approximately 0.3% were reported in the final quarter of the year and subsequently delayed any further progress.

Initially the asset purchases will be reduced by $15 million from the current $85 million and this is scheduled to begin towards the end of March 2013.

The $70 million will be cut down to a slim $25 million in July 2014.

The current Chairman, Ben Bernanke, completes his second and final term at the end of January and therefore will not be overseeing the QE process. However, the current President of the United States, has already nominated Janet Yellen, who is the Vice Chairman to succeed Bernanke as of February 2014.

Quantitative Easing, which began in September 2012, has thus far cost the Fed a total of $3.8 trillion.

The Fed was expected by economists across the globe to begin the tapering process by last month down to $80 million but due to the government impasse, this was impossible.

In addition, the Federal Reserve Bank is still not comfortable with the general state of the economy, Ben Bernanke said last month, “Conditions in the job market today are still far from what all of us would like to see.”

Also, because of the lack of many government services necessary data for the month of September is unavailable so necessary estimates cannot be made by the Federal Reserve.

Prior to the shutdown analysts predicted that the tapering would have commenced in December of this year.

Due to this move by both political parties, the citizens of the country were not only angry, but according to Bloomberg Consumer Comfort Index they were also quite pessimistic about the nation’s economic progress.

After a total of 16 days, the President of the US, Barack Obama, signed a bill re-opening the government until mid-January 2014 suspending the current debt limit until February 2014.

Although damage has already been done, the Fed hopes that their new plan will allow them to recover.

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