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By Mohamed El-Erian
Published: October 13 2010 13:25 | Last updated: October 13 2010 13:25
This week's release of the minutes of the September 21 meeting of the Federal Open Market Committee points to an activist Federal Reserve that is in policy experimentation mode "“ an institution that feels compelled to take additional measures to energise the American economy yet is uncertain about the potency of its interventions. This mix, of a highly engaged institution having to operate with imperfect instruments, has implications that are felt well beyond the US.
Judging from the minutes, it is virtually a foregone conclusion now that the Fed will announce on November 3 that it is re-engaging in "unconventional policies" "“ a new programme of quantitative easing, nicknamed QE2. By buying securities, the Fed will be looking to "push" others into taking more risk "“ to push investors to move out on the risk spectrum and buy corporate bonds and stocks; to push banks to use their large excess reserves to make loans; and to push large companies to deploy their record cash balances to purchase equipment and hire people.
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