The Fed told us QE2 would jump-start the economy. That hasn’t happened. So what’s the next step?
More quantitative easing, according to some financial experts.
The Federal Reserve hasn’t announced or even leaked word that it will launch QE3 yet. But major financial experts think QE3 is likely, possibly in just weeks.
Kathy Lien, director of currency research at GFT: “The pressure [on the central bank] for QE3 has increased.”
Stephen Pope, managing partner at Spotlight Ideas: “We do seriously think that QE3 may well be an unavoidable fact of life.”
Brian Belski, chief investment strategist at Oppenheimer & Co.: “We don’t want to see QE3. We think that only prolongs the inevitable when the Fed eventually has to sell these securities.”
Simon Maughn, co-head of European equities at MF Global: “QE3 is coming. One more big injection of cash into the bond market should take you through at least the summer season.”
Grim numbers following QE1 and QE2
Seven months after the Fed bought $600 billion worth of Treasury bonds and notes, Fed chairman Ben Bernanke declared QE2 a success:
“I do believe that the second round of securities purchases was effective. We saw that first in the financial markets.”
Some would agree that QE2 did help the financial markets – but that’s where the help ended.
May’s economics numbers show: Unemployment is rising. Manufacturing is down. Interest rates are higher than before QE2 launched.
In the short term, another round of quantitative easing could sustain the two-year-plus growth of investors’ stocks and 401(k) plans.
Long term – who knows?
But it could well be that the Fed figures the third time’s a charm.
Are you for or against a third round of qualitative easing? Let us know about it below.