U S Fed Pumps Extra $600 Billion

US Federal is about to pump $600 billion trough fresh government bonds in account to shore up recovery of US economy. The Fed would adjust the programme as needed to best foster maximum employment and price stability. The US Central Bank would buy about $75 billion every month for next eight months till June 2011.

This move seems to be the last move by US Fed to boost economic recovery. This move is known as quantitative easing so called QE2. Quantitative easing is a way for the Fed to boost the economy by driving down long term interest rates when short term interest rates are already at zero. Some economist also predicts that this move would cause the dollar to fall further below the current levels.

India would be a huge beneficiary of US Fed’s Quantitative easing, however a significant risk posed by this money infusion is a spur India’s already high wholesale price index. Government will continue the battle with inflation in country as commodity prices will keep moving higher.

Source :ET