According to the article On Quantitative Easing, the Federal Reserve decided to take the route of Quantitative easing to lower

the interest rate and boost the economic growth. In order to fund this buy back, the Fed has the ability to create money. In addition to its revious holding of bonds, the Fed has almost !uadru led its holding to " # trillion which makes Quantitative easing the most massive economic stimulus rogram in the world. As a result of this QE rogram, the banks had more lending ca ability which made the interest rate they charge from borrowers to dro and formed the basis for other rates also. As a result of money su ly in the market the value of dollar came down and therefore

the investors got attracted to the stock market. On $ecember %&, '(%' the Fed declared that it would cut down its buy back because its economic targets were being met now. )his followed *en *ernanke+s announcement on ,une %-, '(%. that Fed was considering )a ering which created a anic amongst investors who started selling the bonds and shifted their investment to stocks. In my o inion the course of action taken by the Fed is /ustified. QE managed to achieve some of its goal. It restored trust in bank and its o eration by removing the sub rime mortgage from the balance sheet of the bank. It ke t interest rates low, thus reviving the real estate market. It romoted economic growth and also stabili0ed 1.2 economy. It rovided the funds which in turn rovided confidence to ull the economy out of recession. 1nfortunately it did not achieve the target of making more credit available. )he money rovided by it to banks was utili0ed to tri le the stock rices through more dividends or buy back o tions instead of lending. 3owever due to this stringent lending no inflation was created in consumer goods but it did create asset inflation. As a result of

this investors were forced out of bonds and shifted to stock. 3ad I been an investor I would have done the same.

References Amadeo, 4. 5'(%., $ecember .(6. What is the Federal Reserve Quantitative Easing. Retrieved from htt 788useconomy.about.com8od8glossary8g8Quantitative9Easing.htm