WASHINGTON, DC–In a widely anticipated move, the Federal Reserve decided on Wednesday to keep short-term interest rates steady, and announced a start date for its plan to burn $10 billion per month in an “epic” bonfire.
The bonfire program represents the other side of the extraordinary monetary policy measures the Fed implemented in the wake of the Great Recession. Those measures included the creation of trillions of dollars in new money, which were then spent primarily on US Treasury Bonds and mortgage-backed securities, with the goal of lowering long-term interest rates and increasing economic activity.
Although economic growth never recovered to historically normal rates, interest rates did plummet as intended and have stayed consistently low. Now the Fed has determined the policies were successful enough, and is starting to unwind the initial money creation. This led to the tricky question of how to dispose of all the money they printed.