Tags: WSJ Fed Easing Wasnt Instant Economic Cure

WSJ: Fed Easing Wasn't Instant Economic Cure

Wednesday, 22 Jun 2011 09:21 AM

The Federal Reserve's quantitative easing program, a $600 billion bond buyback designed to pump up the economy and hiring along with it, has turned out to be a dose of mediocre medicine and not the silver bullet the economy needs, experts say. But it wasn't terrible, either.

The program, known widely as QE2, deserves credit for steering the economy away from deflation.

However, it didn't make a serious dent in the country's high unemployment rates.

"You don't want to fool yourself into thinking that the Fed has some kind of power to solve all of our problems," says James Hamilton, an economist at the University of California at San Diego, according to The Wall Street Journal.

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Fed Chair Ben Bernanke
(Getty Images photo)
"The final verdict on this was that in a period in which they felt great anxiety, they did the best they could," says Louis Crandall, a bond market analyst economist with Wrightson ICAP.

Others were a little more critical.

"If people have a good business need for credit and they're worthy of being lent to, I believe they're able to get credit whether there's quantitative easing or not," says Dan Floorness, chief financial officer of Fastenal, a seller of bolts, screws and nuts.

Federal Reserve Chairman Ben Bernanke and his colleagues are still facing plenty of challenges as they try to keep a fragile expansion on track.

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A host of economic indicators have slowed in recent weeks and a sharp spike in gasoline prices earlier this year has made consumers and businesses more cautious about spending. The central bank, wrapping up a two-day meeting on Wednesday, is expected to acknowledge the recent soft patch but insist that growth should rebound in the second half of the year.

Philadelphia Federal Reserve Bank President Charles Plosser has said the Fed's exit won't disrupt markets.

"Perhaps more important than the details of any exit plan is the very establishment of a systematic plan itself — one that can be clearly communicated to the markets and the public in a way that reduces uncertainty," says Plosser, according to Bloomberg.

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The Federal Reserve's quantitative easing program, a $600 billion bond buyback designed to pump up the economy and hiring along with it, has turned out to be a dose of mediocre medicine and not the silver bullet the economy needs, experts say. But it wasn't terrible,...
WSJ Fed Easing Wasnt Instant Economic Cure
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2011-21-22
 

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