Now is the Time to Buy on Galveston Island - interest rates on the rise

Fed Plans to Pull Back Money

Federal Reserve Chair Ben Bernanke released a formal proposal Wednesday to collect the trillions of dollars that the Federal Reserve has spent to prop up the economy.

Bernanke emphasized that the economy still needs the support of easy money, but he warned that the Fed will soon have to “tighten financial conditions” and raise interest rates. He didn’t specify how much, although he offered some reassurance that the increase won’t be dramatic immediately.

In his report, Bernanke said the Fed plans to sell securities while simultaneously offering to rebuy them at some point.

He also said the Fed plans to sell the equivalent of certificates of deposit to banks and financial firms and take a piece of the banks’ reserves in return.

The release of Bernanke’s proposal initially rattled the stock market but later stocks crept up again.

Source: CNNMoney.com, Jennifer Liberto (02/10/2010