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Expert: Fed changes could upset balance

Posted on Friday, October 31, 2014 at 9:17:45 AM

The past several years of this country's fiscal health have been marked by stimulus plans set forth by the Federal Reserve. Now that economic conditions have improved, changes could be coming that might upset the balance that has been established in recent memory.

This is the opinion of former Fed Chairman Alan Greenspan, who told a crowd during the Council on Foreign Relations that upcoming Fed action related to its stimulus will alter the current financial markets, as reported by Bloomberg. 

Greenspan explained that while Fed stimulus has increased asset prices, it hasn't resulted in a surge in demand, and that could become important should any stimulus package be pulled by the government agency.

"What you're basically seeing is an explosion of assets, an explosion of reserve balances, and that's the only two statistics that are moving," Greenspan said at the event, Bloomberg reported.

In a blog post for S&P Dow Jones Indices, David Blitzer, chairman of the Index Committee, wrote that the Fed could soon increase interest rates. This is due to steady economic gains in other areas, such as an improved labor market outlook. Blitzer explained that opinions are split within the Fed, and that could further impact policy moving forward.

For potential homebuyers interested in residential financing, it is worth following any upcoming changes announced by the Fed.