Tags: Goldman | Sachs | QE3 | 2 trillion

Goldman Sachs: QE3 May Total $2 Trillion

By    |   Tuesday, 25 Sep 2012 04:50 PM

The Federal Reserve's latest quantitative easing program (QE3) could last until the middle of 2015 and total $2 trillion, Goldman Sachs economists say.

The Fed has announced that it will buy $40 billion a month of new mortgage-backed securities for an indefinite period.

The central bank also said it will re-invest funds from maturing government securities. And it will continue Operation Twist, which entails buying long-term Treasurys and selling short-term Treasury paper.

Put all that together, and you may get $2 trillion, Goldman economists estimate in a report obtained by CNNMoney.

Editor's Note: Economist Warns: ‘Money From Heaven a Path to Hell.’ See Evidence.

They also forecast that the Fed won’t raise the federal funds rate – currently zero to 0.25 percent -- until 2016.

The Fed is unlikely to halt QE3 until the unemployment rate dips to 7.5 percent from 8.1 percent currently, Goldman’s economists say.

The central bank sees the rate in a range of 6.7 percent to 7.3 percent for 2014. If that’s correct, QE3 could terminate by mid-2014.

But the Goldman economists are skeptical. “If the recovery continues to disappoint, additional steps are possible," they write. "These include an increase in the pace of asset purchases.”

Adam Parker, chief U.S. equity strategist for Morgan Stanley, sees a good chance for further easing, too.

“We wouldn’t be at all surprised to see the Fed dramatically augment this program (i.e., QE4) before year-end, particularly if economic and corporate news continue to deteriorate," he writes in a report obtained by Business Insider.

Editor's Note: Economist Warns: ‘Money From Heaven a Path to Hell.’ See Evidence.

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The Federal Reserve's latest quantitative easing program (QE3) could last until the middle of 2015 and total $2 trillion, Goldman Sachs economists say.
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2012-50-25
Tuesday, 25 Sep 2012 04:50 PM
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