Federal Reserve considering buying stocks and corporate bonds?

The Federal Reserve may also buy stocks and corporate bonds in the future. monopolize To support the economy, should a new crisis break out and a shortage of government bonds arise. Fed Chair Janet Yellen said this last Thursday during a video conference with a number of bankers in the US state of Kansas. In doing so, the central bank would follow the example of the Bank of Japan and the ECB, two central banks that already have experience in buying financial assets other than government bonds.

"If, at some point, we find out that the limit on buying safe assets, such as government bonds, has been reached, then it may be useful to be able to intervene in markets where prices have a more direct relationship with spending."

More stimulation

With these words, Yellen is signaling that the Federal Reserve is willing to do more to drive inflation and further erode the value of money. By buying corporate bonds and shares, the value of these assets increases, which may make it easier to spend money. This theory was called the 'wealth effect' by her predecessor Bernanke.

The Federal Reserve's open talk of more stimulus suggests that the U.S. economy still can't stand on its own two feet. Although the central bank has stopped buying government bonds, normalizing interest rates is still a step too far. Not a single rate hike has been implemented this year, while at the end of last year the central bank announced four rate hikes for 2016.

Yellen: "Buying corporate bonds and shares is an option"