Message To Inflation Hawks: QE3 Was Open Ended And Gave Fed Flexibility To Act Based On Economic Developments

Monday, January 14, 2013 08:35
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Message To Inflation Hawks: QE3 Was Open Ended And Gave Fed Flexibility To Act Based On Economic Developments

Tags: Economic Outlook | Federal Reserve | inflation

Those concerned that the Fed may not act in time to avert hyperinflation may not have noticed the escape hatch Fed Chief Ben Bernanke created for himself in the process of multiple quantitative easings.
 
QE3 had no specific end-date. It is open-ended, giving the Fed leeway to adjust the pace of bond-buying as dictated by economic development.

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If gross domestic product (GDP) grows at a faster pace, the Fed can slow down its purchases. If GDP slows once again, the Fed has the option of picking up its bond-buying pace and amounts.
 
The flexibility works both ways. Several Fed officials at the December meeting stated a desired
target of ending the bond-buying programs by the end of 2013.
 
Although Wall Street has been disappointed with various economic reports during the recovery, the Fed may have positioned itself to act quickly if inflationary pressures build.

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