QE III Finally Arrives by Tim McLaughlin
Key takeaways from the FOMC meeting yesterday, where QE III (a third round of quantitative easing) was announced:
THE FED EXTENDED ITS QUANTITATIVE EASING PROGRAM WITH A THIRD ROUND OF STIMULUS IN ITS LATEST EFFORT TO INCREASE THE PACE OF THE US ECONOMIC RECOVERY
WILL BUY $40B MBS MONTHLY AND CONTINUE OPERATION TWIST…THIS IS OPEN-ENDED AND THEY WILL ADD MORE PURCHASES IF ECONOMY DOESNT IMPROVE
THE FED WILL BUY, STARTING TOMORROW, ANOTHER $23B OF MBS IN SEPT
EXTENDS FORWARD GUIDANCE TO MID-2015 (RATES TARGET PRIOR WAS LATE 2014)
Taken together, the Fed will be purchasing $85 billion of longer term securities a month through the end of the year, an increase from the $45 billion of long-term bonds it is currently buying each month under Operation Twist. It will also be printing more money to fund its mortgage-bond purchases, expanding the size of its $2.8 trillion balance sheet.
The hope is that this will further jump start the economy, encourage spending and investment, that this will keep borrowing costs low, and will generate more job creation in the coming months.
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The median time a home was listed for sale on the market was 69 days in July, down 29.6% from 98 days in July 2011, according to new data from the National Association of Realtors (NAR). One-third of homes purchased in July were on the market for less than a month, while one in five was on the market for at least six months. At the end of July, there was a 6.4-month supply of homes on the market at the current sales pace, which NAR says is 31.2% lower than the 9.3-month supply in July 2011. “As inventory has tightened homes have been selling more quickly,” says Lawrence Yun, NAR’s chief economist. “A notable shortening of time on market began this spring, and this has created a general balance between home buyers and sellers in much of the country. This equilibrium is supporting sustained price growth, and homes that are correctly priced tend to sell quickly, while those that aren’t often languish on the market.”
