Economic Notes for the Week of September 17th

Last week saw many important economic developments that – for most investors – made for a very good week.


Probably last week’s biggest news came out of Europe.  Germany’s Constitutional Court ratified the country’s participation in the 700-billion-euro European Stability Mechanism (ESM), the euro zone bailout fund.  Germany is liable to contribute 27% of the ESM, or about 190 billion euro.  Combined with the European Central Bank’s plans to buy the government bonds of struggling countries and the establishment of the ESM, investors will see the European crisis in better control, which is certainly positive to global capital markets.

As the market expected and longed for, the Federal Open Market Committee announced the third round of quantitative easing (“QE3”) to help foster maximum employment.  The Fed will purchase additional agency mortgage-backed securities at a pace of $40 billion per month.  In addition to June’s accommodative program, the Fed will acquire longer-term securities by about $85 billion each month, which would help keep longer-term interest rates from rising and help support the mortgage market.  The committee also decided to extend current fed fund rates near the zero level from late 2014 to at least mid 2015. Read more