The Federal Reserve and the govt. of the USA have joined hands to launch the Stimulus Check program. The key aim is to give the economy a boost and to make sure that money keeps moving from workers to businesses.
In March of 2022, the stimulus check program will be terminated.
The US government had been giving out stimulus checks earlier this year. Even though the government has stopped, certain states are still giving stimulus checks. The Reserve will do the same as the bond-purchasing stimulus program is to end earlier than planned.
Stimulus Check Update: How Will It Contribute?
The Federal Reserve has stimulated the economy by buying bonds worth billions every month. The downside to this is that it creates inflation, which is a severe problem.
In the month of November, directors of the Federal Reserve decided to scale down their bond purchasing from $120 billion to $105 billion per month. Presently, they will begin reducing the budget by $30 billion each month.
They will buy $60 billion worth of mortgage securities and treasury next year in January.
Consequently, the stimulus program will end by March 2020.
The rise in inflation rates is the major reason for the winding down of the stimulus program. Even though the Federal Reserve is known to make slow changes, they are taking drastic measures because they fear high inflation rates may stay constant.
Principal Global Investors’ chief strategist, Seema Shah, in an interview with BBC said that the Federal Reserve has only just realized the growing rates of inflation. As the CPI is nearly at 7%, the Federal Reserve’s decision to accelerate the end of the stimulus program comes as no surprise, she added.
Kenneth Rosen said that if the Federal Reserve could magically stop the program they would stop it entirely. University of California’s Kenneth Rosen is a housing economist who in an interview with the WSJ said that there is a lot of money rolling through all single asset classes.
