Monetary-stimulus tools such as quantitative easing won't help the economy much, said Nigel Gault, chief U.S. economist of IHS Global Insight.
The Federal Reserve is currently running an open-ended round of quantitative easing, under which the U.S. central bank buys $40 billion in mortgage-backed securities a month from banks to jolt the economy via fresh liquidity injections designed to keep rates at rock-bottom levels.
Separately, the Fed is also running its so-called Operation Twist stimulus program, under which the Fed sells $45 billion a month in short-term Treasurys in the open market and simultaneously buys the same amount in longer-term U.S. government debt.
Unlike quantitative easing, Operation Twist does not expand the Fed's balance sheet, but many economists feel a sluggish recovery and fiscal uncertainty will prompt the Fed to let Operation Twist expire this month and replace it with added outright quantitative easing, dubbed my many as printing money out of thin air.
Present and past rounds of quantitative easing work by pushing interest rates down to spur economic activity, but rates are already low, which would make further easing largely pointless.
"I don't think (Fed action) makes a huge difference," Gault told USA TODAY.
"But it's a question of do they do something rather than nothing. It probably is best to do something."
The Fed's current round of quantitative easing marks the third time (QE3) the Fed has intervened in the economy with the policy tool, though other economists agree the Fed will keep its foot on the accelerator thanks to concerns the economy will careen over the fiscal cliff, a combo of tax hikes and spending cuts due to take effect at the end of the year.
Expect Operation Twist to expire and a fourth round of quantitative easing (QE4) to follow.
"They do want to keep the easing train going," said George Goncalves, head of U.S. rates strategy at Nomura Securities, according to CNBC.
"They are probably going to start expanding their balance sheet and we think it does make sense to start calling it QE4."
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