Dovish Talk may be More Powerful than QE

Two Federal Reserve economists are telling the Street what it already suspected: Dovish talk may be even more powerful than quantitative easing.

In a research note, the economists wrote that the Federal Reserve’s asset purchases, or quantitative easing, probably provided a “modest boost to economic growth and inflation.” However, the effects of QE would depend in large part on the Fed’s interest-rate guidance, the note said.

“Estimates from a macroeconomic model suggest that such interest- rate forward guidance probably has greater effects than signals about the amount of assets purchased,” the economists wrote in the paper, released by the San Francisco Federal Reserve.


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