While the Federal Reserve is poised to announce an end to its third round of quantitative easing (QE3) later this month, some financial industry participants already are urging the central bank to consider QE4, given global economic weakness and turbulence in financial markets.
Mohamed El-Erian, former CEO of Pimco, doesn't think too highly of the idea. "It is so predictable yet also so unfortunate," he writes in The Financial Times
"The hurdle for such a policy step is high, and it should be if it is not accompanied by a more comprehensive policy response out of Washington."
The problem is that while QE4 would be designed to depress long-term interest rates, they already have dropped to near-record lows, El-Erian says.
The 10-year Treasury yield fell to a 17-month low of 1.86 percent Wednesday. It stood at 2.2 percent late Monday.
"The expected benefits would be small in terms of generating incremental growth that is both sufficiently durable and inclusive; and, if more robust growth remains elusive, the U.S. economy could suffer down the road from another round of artificially boosted asset prices, and the excessive risk-taking that comes with that."
While he concedes that call for QE4 "are understandable but misguided," El-Erian notes that "renewed Fed intervention of that type would deliver insufficient growth while making the subsequent market correction more dangerous for main street."
However, he doesn't believe the Fed will drop into the background. "Look for them to make calming remarks that seek to reassure markets that interest rates will remain low for long."
Meanwhile, "there are few, if any signs, of a less polarized U.S. Congress for the Fed to bridge to the holistic policy response that is urgently needed to put the US economy on a stronger growth footing," El-Erian writes.
Boston Fed President Eric Rosengren agrees with El-Erian.
"I don't expect that we need to" launch another round of quantitative easing, he tells CNBC
. "If the economy got weak enough that it was required, we should do it. I certainly hope and I don't expect that will be the case, but I can't rule anything out."
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