Tags: Fed | Bullard | QE | easing | Maximum | impact | Six

Fed’s Bullard: QE May Have ‘Maximum Impact’ in Six Months

Monday, 08 Nov 2010 01:00 PM

Federal Reserve Bank of St. Louis President James Bullard said the impact from the Fed’s decision to buy $600 billion of Treasuries through June will probably stimulate the economy as soon as six months from now.

“Easing of monetary policy produces its maximum impact on real variables in the economy, including output, consumption, and investment, with a lag of six to 12 months and can be difficult to disentangle,” the St. Louis Fed said today in a statement today based on remarks planned by Bullard in New York.

The benefits of quantitative easing, or additional bond purchases, “outweigh the risks” and the impact of the program has already been seen in the financial markets, the St. Louis Fed said.

Bullard was an early proponent among policy makers of additional stimulus, saying the central bank should incrementally buy securities. He opposed starting the program with big purchases.

“While asset purchases are sometimes viewed as unconventional, the financial-market effects have been entirely conventional: real interest rates declined, inflation expectations rose, the dollar depreciated and equity prices rose,” Bullard plans to say, according to the St. Louis Fed.

The Fed needed to supplement its near-zero interest rate policy with quantitative easing because the economic recovery has faltered, and additional disinflation would mean that real interest rates would rise, according to Bullard.

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Federal Reserve Bank of St. Louis President James Bullard said the impact from the Fed s decision to buy $600 billion of Treasuries through June will probably stimulate the economy as soon as six months from now. Easing of monetary policy produces its maximum impact on real...
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2010-00-08
Monday, 08 Nov 2010 01:00 PM
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