Tags: Economists | Fed | easing

Economists to Fed: Just Say No to QE3

Thursday, 25 Aug 2011 03:48 PM

Economists don't want the Federal Reserve to announce a third round of quantitative easing and instead, say they hope the monetary authority lets the economy heal without its help.

The Fed has already launched two rounds of quantitative easing, known widely as QE1 and QE2.

QE1 saw the Fed buy $1.7 trillion in assets from banks, mainly mortgage securities, while QE2 saw the central bank snap up $600 billion of Treasury bonds.

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Fed Chairman Ben Bernanke
(Getty Images photo)
Those purchases were designed to pump liquidity into the financial system and although supporters say they did fuel growth and veered the economy away from falling deeper into recession, critics says they didn't fuel lasting consumer demand, which the economy needs to embark on more lasting recovery, and pressured inflation upward in the process.

"The slowdown is not the fault of not enough liquidity," says John Silvia, chief economist at Wells Fargo, tells MarketWatch.

"The Fed has shot the big cannons. They are now playing the game with smaller ammunition."

The Fed announced QE2 its annual retreat in Jackson Hole, Wyoming, in 2010.

That retreat is taking place right now, and economists don't want to hear any announcements from Fed Chairman Ben Bernanke of a QE3.

"I hope he talks about the limitations of monetary policy," says Mickey Levy, chief economist at Bank of America, MarketWatch reports.

The Federal Reserve has said it will likely keep interest rates low for another two years, although that doesn't mean the Fed is specifically planning new easing measures, St. Louis Fed President James Bullard has said.

"The most likely outcome for the U.S. economy is still that the economy continues to grow at a moderate pace through the second half of the year," says Bullard, according to Bloomberg.

"If the economy is substantially weaker than expected, we could take more action, especially if it was coupled with a renewed deflation risk."

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Economists don't want the Federal Reserve to announce a third round of quantitative easing and instead, say they hope the monetary authority lets the economy heal without its help. The Fed has already launched two rounds of quantitative easing, known widely as QE1 and...
Economists,Fed,easing
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2011-48-25
Thursday, 25 Aug 2011 03:48 PM
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