By
NICK GOSNELLHutch
Post
HUTCHINSON — Creighton University economist Ernie Goss explains that on Wednesday, the Federal Reserve is expected to announce it will start unwinding its $120 billion monthly bond purchases.
"What that does is, they buy the bonds and that pushes down interest rates, or keeps interest rates low," Goss said. "They're going to pull back, which means there will be some upward pressure on interest rates, long-term interest rates. Again, they're pulling back on their stimulus, they're not pulling back on all of it, only about $15 billion a month."
Investors see inflation as a serious danger going forward.
"Inflationary pressures penalize the consumer out there and the worker," Goss said. "It's like anything. Too much of a good thing is not a good thing, in this case, inflation. The Federal Reserve seeks to have 2% inflation. Now, we're running at more than twice that."
Headline inflation including food and energy rose at a 4.4% annual rate in September, according to the Department of Commerce last Friday.
"What's the transition?" Goss asked rhetorically. "What's the period of transition? I think it's much longer than what the Federal Reserve anticipated."
The taper of the bond purchases does not necessarily mean that rate hikes will follow.