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June 29, 2011 12:06 pm
Will there be life after QE2? Fed chairman Ben Bernanke first introduced this new monetary policy last year on August 27 at the Fed's annual conclave in Jackson Hole, Wyoming. It terminates at the end of this month after the Fed purchased $600bn in US Treasuries under this second round of quantitative easing. The stated aim of this controversial programme was to stimulate faster economic growth in an effort to lower unemployment and avert deflation, as required by Congress under the Fed's dual mandate.
Now that QE2 is about to terminate, the economy continues to grow at a sub par pace. Unemployment remains high. Inflationary expectations, briefly boosted by QE2, seem to be declining again. Meanwhile, Mr Bernanke seems to have lost enthusiasm for QE, suggesting another round is unlikely even though he and his colleagues are concerned about disappointing economic performance.
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