FOMC Announcement: Inflation Coming
Today the Federal Open Market Committee (FOMC) — a part of the Federal Reserve — had it’s regular meeting. With interest rates already set between 0% and 0.25%, there really weren’t any expectations of a new interest rate decision. However, the FOMC strives to remain relevant, and will do so through offering economic commentary. And by taking various actions to help with economic stimulus.
So, today, it is no surprise that the FOMC made an announcement that *gasp* as economic stimulus works its way through the financial system, there will be inflation. This is not a huge surprise; an increase in the money supply – like we will be seeing with the eocnomic stimulus package — will, in fact, result in inflation. (Get your investments ready for inflation — TIPS could be a good idea while they’re cheap.)
Here are some of the actions that the Fed says it stands ready to engage in:
- Purchase long term Treasuries.
- Extend TARP to include funding for households and small businesses.
- Increase its purchase of short-term debt and mortgage backed securities.
These actions are all things that the Federal Reserve can do in an effort to get money flowing through our financial system. This action proves that the FOMC is still relevant — even without the ability to continue with interest rate cuts — and that it maintains some influence.
Of course, all of these actions will serve to contribute to future inflation, so now is a good time to be thinking about what you can do in terms of preserving your principal with carefully chosen investments.
Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.
