Economists Fear Long Term Impact of Fed’s Plan

By Stephanie Parkinson

September 14, 2012 Updated Sep 14, 2012 at 5:50 PM EDT

Fort Wayne, Ind. (Indiana’s NewsCenter) - A move by the Federal Reserve to stimulate economic growth has some economists worried about the long term impact.

QU 3 is already proving it can boost the economy. The DOW hit a new record Thursday, the highest seen since 2007.

The plan includes buying bonds from banks to help raise mortgage values and keep interest rates low. This is the third time since 2008 the Fed has taken this type of action.

A local economist says this will help Americans now long term he fears it will create inflation. He says a long term plan needs to come from lawmakers in Washington.

"What you have is the Federal Reserve trying to compensate for the inactions of the Congress and the Senate. Eventually we're going to need a solid fiscal policy. We need to grow the economy, we need some inflation, we need to raise taxes, cut spending and at some point we need to start paying back this debt," said Todd Larson, financial expert.

This plan is very similar to the first one they put in place in 2008. The second plan was different because they bought treasury securities instead of mortgage backed securities, but they are essentially two different tactics to reach the same goal.

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