The president of the Federal Reserve Bank in Chicago, Charles Evans, says that the third quantitative easing (QE3) will make the US economy better able to weather economic storms in Europe, China, and across the globe.
This Website Is For Financial Professionals Only
It also will act as a buffer against the effects of the fiscal cliff that are expected to throw the economy back into recession if current tax laws are allowed to expire as scheduled.
Evans has been a strong and vocal proponent of Fed stimulus action over the past year. He wants the Fed to continue easing until unemployment is below 7% while keeping inflation below 3%.
The Fed took action as continued disappointment in the employment sector magnified the tepid growth of the economy. Economic growth dwindled to 1.7% in the second quarter of 2012 from a 2% growth rate in the first quarter and a 4.1% growth rate in the fourth quarter of 2011.
The Fed’s statement that it intends to remain accommodative until well after the economy regains strength assures investors that the Fed will not tighten policy too early in an effort to ward off inflationary pressures.
Risking inflation of a few tenths above the target 2% inflation rate is worth doing if it gives the economy the boost it needs to get on a more solid growth pattern.
The Fed made a sharp move toward a proactive stance last week after its September 12 and 13 meeting, offering investors greater assurance that it will do whatever it takes
to get the unemployment rate down while also keeping a low target on inflation.
The move will boost investor confidence and also consumer confidence that should promote spending, a key driver of economic growth.