After months of anticipation and expectation, the United States Federal Reserve agreed in a 9-1 vote on Wednesday to end its five-year policy of quantitative easing. In layman’s terms, the decision means that those senior banking officials and economists who steer policy believe that the US has fully recovered from the effects of the financial crisis of 2008, that the economy is set for growth and that all of the indicators are positive. By ending its policy of quantitative easing — no longer buying treasury bonds that put money into the economy as a whole — the Fed is signalling that jobs are being created, more consumers are spending and it sees underlying strength.
However, while the US economy is picking up, there is still cause for alarm around the world. Economic output is slowing in China, commodity prices — the raw materials used to build everything bought by consumers and made by factories — are depressed, oil prices are at lows not seen in 20 years and the European economy as a whole is spluttering along with high debt levels and stubborn unemployment figures.
The Fed’s decision should be welcomed within the US and it certainly sounds an optimistic note. But in Europe, there is still need for greater money supply in national economies to stimulate growth. Austerity alone is not the way forward. European central bankers should not follow suit — what is good for the goose is not always good for the gander.
