Bernanke suggested today that it would not necessarily be altogether insane to consider studying the possibility of a further round of quantitative easing. Maybe.
http://www.federalreserve.gov/newsevents/speech/bernanke20120831a.htm
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(September) Surprise!
http://www.federalreserve.gov/newsevents/speech/bernanke20120831a.htm
the bernankester said:Overall, however, a balanced reading of the evidence supports the conclusion that central bank securities purchases have provided meaningful support to the economic recovery while mitigating deflationary risks....
In sum, both the benefits and costs of nontraditional monetary policies are uncertain; in all likelihood, they will also vary over time, depending on factors such as the state of the economy and financial markets and the extent of prior Federal Reserve asset purchases. Moreover, nontraditional policies have potential costs that may be less relevant for traditional policies. For these reasons, the hurdle for using nontraditional policies should be higher than for traditional policies. At the same time, the costs of nontraditional policies, when considered carefully, appear manageable, implying that we should not rule out the further use of such policies if economic conditions warrant....
As we assess the benefits and costs of alternative policy approaches, though, we must not lose sight of the daunting economic challenges that confront our nation. The stagnation of the labor market in particular is a grave concern not only because of the enormous suffering and waste of human talent it entails, but also because persistently high levels of unemployment will wreak structural damage on our economy that could last for many years.
Over the past five years, the Federal Reserve has acted to support economic growth and foster job creation, and it is important to achieve further progress, particularly in the labor market. Taking due account of the uncertainties and limits of its policy tools, the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.
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bill mcbride said:Bernanke's comments suggest QE3 will be launched very soon, perhaps on September 13th following the next FOMC meeting.
I thought the odds of QE3 in August were high - and the minutes of the meeting indicated they were very very close. It is possible that the FOMC in September will announce an extension of the extended period until 2015 (from late 2014), and wait again for QE3, but that would seem at odds with Bernanke's comments today.
(September) Surprise!