The beginning of the end is here.
The widely-anticipated taper of the U.S. Federal Reserve’s Quantitative Easing program or QE3 will finally begin early next year, the US Fed announced today at the conclusion of the two-day Federal Open Market Committee (FOMC) meeting.
U.S. Fed announces Quantitative Easing (QE3) tapering
The Federal Open Market Committee (FOMC) of the U.S. Federal Reserve announced yesterday, June 19, that if the U.S. economy continues to improve, it will start winding down its asset-buying program and may completely end it by mid-year of 2014.
The news sent stock markets in the United States down by more than 1 percent, with the Dow Jones industrial average (DJIA) closing 205.96 points lower, or 1.34%, at 15,112.27.
The Standard & Poor’s 500 Index (S&P 500), meanwhile, closed 1.39% lower at 1,628.92, while the Nasdaq Composite Index was down 1.12% at 3,443.20.
‘Federal Funds Rate’ – explained in simple terms
On September 18, 2007, the US Federal Reserve (the “Fed”) cut its target Fed funds rate by 50 basis points (half-of-a-percentage point) to 4.75%, giving a boost to stocks markets worldwide.
The Fed also cut its discount rate by another 50 basis points, bringing it down to 5.25%.