QE May Have Only Helped with Limited Growth

The Federal Reserve’s unprecedented expansion of its balance sheet known as quantitative easing has probably given a more limited boost to the U.S. economy than previously estimated, two regional Fed economists said.

“Asset purchase programs like QE2 appear to have, at best, moderate effects on economic growth and inflation,” Vasco Curdia, an economist at the San Francisco Fed, and Andrea Ferrero, an economist at the New York Fed, said in a research note released today. “Communication about the beginning of federal funds rate increases will have stronger effects than guidance about the end of asset purchases.”

Chairman Ben S. Bernanke said June 19 that the Fed may begin reducing asset purchases later this year and end them around mid-2014 if the economy improves in line with officials’ expectations. The central bank will keep “a high degree of monetary accommodation” in place for “an extended period” by keeping interest rates near zero after the purchases end, Bernanke said in congressional testimony last month.


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