Sunday, January 29, 2012

Monetary policy,Full speed ahead

THE ocean liner Queen Elizabeth 2 was launched in 1967 to throngs of excited spectators. Expectations are considerably lower for the Federal Reserve’s launch of monetary QE2: a second round of quantitative easing, the purchase of bonds with newly printed money. Critics have already predicted it will be either ineffectual or dangerous.

Undeterred, the Fed has moved ahead:

To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to expand its holdings of securities. The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee intends to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month. Read more....

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