Economic Notes for the Week of June 25th

The Federal Reserve Open Market Committee ended their meeting last week with little new news.  Target rates, at zero to roughly a quarter of a percent, can’t be forced any lower, and, therefore, aren’t as effective at further economic stimulation as they once were.  What the Fed can do (and is doing) is extending ‘Operation Twist,’ which sounds convoluted, but consists of buying long Treasuries back with proceeds gained from selling shorter Treasuries (about $270 billion worth).  The point is to lower interest rates at specific areas on the yield curve where they’ll end up doing the most good—home mortgages, auto loans and capital loans for business equipment tend to fall in the intermediate range, so lower rates here are most stimulative to the economy. Read more