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Fed Moves To Stimulate The Economy, But Will It Help? [AUDIO]

The Federal Reserve took steps Thursday to help the economy, but how much will they help?

Alex Wong, Getty Images

In an open-ended move, the Fed says they will spend $40 billion a month to purchase mortgage securities because the economy is too weak to reduce high unemployment.

It plans to keep short-term interest rates at record lows through mid-2015, six months longer than previously planned. And it’s ready to try other stimulative measures if hiring doesn’t pick up.

Thursday’s announcement marked the Fed’s latest dramatic intervention since the financial crisis erupted in 2008 and the Great Recession shot unemployment into double digits. The Fed cut its benchmark short-term rate to near zero and has kept it there for nearly four years. And it’s bought more than $2 trillion in Treasuries and mortgage bonds to try to drive down long-term rates.

Yet for all that, the economy is still struggling. The unemployment rate is 8.1 percent. And the Fed estimated Thursday that the rate will fall no lower than 7.6 percent in 2013.

Rider University Economist Maury Randall says the problems that are being faced by the economy are not caused by a lack of liquidity in the banking system.

He says while stocks will go up, prices will also rise, and those with savings and fixed bonds will find their money is worth less. Randall says the key economic problems are beyond the Federal Reserve’s reach…impending tax hikes at year’s end and substantial spending cuts.

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