The Fed's Cautious Return to Normalcy

Like a cautious firefighter turning off the hoses one by one, the Federal Reserve is gradually scaling back the extreme measures it embraced to prop up the U.S. economy. On Sept. 23 the Fed took another step, announcing that it will stretch out by three months its schedule for purchasing mortgage debt to damp down mortgage interest rates and support the housing market. Instead of completing the $1.45 trillion in purchases by the end of 2009, it will complete them by the end of March 2010. That slowdown in the rate of purchases is like cranking down a hydrant to reduce the flow of water to the fire.

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