February 27, 2015
During the past six years, the Federal Reserve invested $3.5 trillion in a bond-buying program designed to ease the country through its latest financial crisis. The Fed program officially came to an end in October in reaction to the substantial improvements made in the employment outlook.
“The committee continues to see sufficient underlying strength in the broader economy to support ongoing progress toward maximum employment in a context of price stability,” Fed leaders said at their October meeting.
Since the announcement, concerns have been raised over how the Fed will maintain stability inthe marketplace as it exits this extraordinarybond-buying policy. David J. Stockton, Senior Fellow at the Peterson Institute for International Economics, met with U.S. Bank leaders recently to discuss trends in the current economy and how Fed policy will affect future investment decisions. (Stockton is also the former Director of the Division of Research and Statistics at the Board of Governors of the Federal Reserve System.)
“One thing we can say with certainty is that slack is diminishing in U.S. labor markets,” he said, noting that the unemployment rate dropped from 10 percent to 5.75 percent since the credit crisis. This is a promising sign, although indicators such as the pace of hiring, wage growth and willingness of employees to quit their jobs, have been slower to follow suit. “The economy is clearly improving, but it's still the case that this is not a normal labor market,” Stockton says.