The US government and the Federal Reserve have teamed up to establish the Stimulus Check program. The main goal is to promote the economy and ensure that money continues to flow from workers to businesses.
The stimulus check program will be phased off in March 2022.
Earlier this year, the US government began issuing stimulus checks. Even though the federal government has stopped providing stimulus funds, several states continue to do so. The Federal Reserve will follow suit, as the bond-purchasing stimulus program will come to an end sooner than expected.
Stimulus Check Update: How Will It Contribute?
The Federal Reserve has stimulated the economy by buying bonds worth billions every month. The disadvantage is that it causes inflation, which is a serious issue.
The Federal Reserve Board of Governors voted in November to reduce bond purchases from $120 billion to $105 billion each month. They are currently cutting the budget by $30 billion per month.
They plan to buy $60 billion in mortgage securities and Treasury bonds in January of next year.
Consequently, the stimulus program will end by March 2022.
As per Digitalmarketnews, the fundamental reason for the end of the stimulus program is the rise in inflation rates. Despite the fact that the Federal Reserve is known for making gradual changes, they are taking drastic measures to ensure that high inflation rates do not continue to remain stable.
Seema Shah, the chief strategist at Principal Global Investors, told the BBC that the Federal Reserve has only recently acknowledged the rising rates of inflation. The Federal Reserve’s decision to accelerate the conclusion of the stimulus program comes as no surprise, she noted, because the CPI is nearly at 7%.
Kenneth Rosen believes that if the Federal Reserve could magically end the program, it would. Kenneth Rosen, a housing economist at the University of California, told the WSJ in an interview that there is a lot of money flowing through all single asset classes.