Sep 13, 2012 9:17 PM GMT
No more one-shot quantitative easing...and the market loves it.
http://www.washingtonpost.com/blogs/ezra-klein/wp/2012/09/13/qe3-reactions-to-the-feds-big-stimulus-move/On Thursday, the Federal Reserve announced yet another round of quantitative easing to boost the economy. What’s new about QE3, as we explained in our primer, is that this round will be open-ended — the Fed will keep injecting money into the economy until growth picks up and unemployment starts dropping significantly. Essentially, Ben Bernanke is trying to shift expectations about the future course of the economy.
— Mark Thoma says that Bernanke was probably influenced by a paper released by Michael Woodford of Columbia University in early September: Woodford “delivered a paper showing that the Fed has the most impact on the economy when it credibly commits to future actions. Thus, according to Woodford, it is not the quantitative easing itself that helps the economy (i.e. how many assets the Fed holds), but rather it’s the commitment to continue purchasing assets until the unemployment rate improves substantially that matters.”
— Justin Wolfers, meanwhile, argued that if Bernanke was trying to help out Obama, he had a funny way of showing it: “There’s no sense in which the Fed’s move today was political. If they wanted to help Obama, they would have done this months ago.”