Author Topic: Will QE2 really end in June?  (Read 777 times)

Offline RationalHusker

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Will QE2 really end in June?
« on: April 27, 2011, 02:46:24 PM »
Well...yes, and no.  From Bernanke's mouth:

“We are going to continue to reinvest maturing securities, both Treasuries and MBS, so the amount of securities that we hold will remain” approximately constant, he said. “The amount of monetary policy easing should remain constant going forward from June.
Monetary Stimulus

When the Fed begins unwinding its record monetary stimulus, “it’s very likely that an early step would be to stop reinvesting all or part of the securities which are maturing,” he said. “That step, though a relatively modest step, does constitute a policy tightening,” Bernanke said.

http://www.bloomberg.com/news/2011-04-27/bernanke-says-end-to-fed-s-treasury-buying-unlikely-to-have-major-impact.html

So we won't be continuing to ADD to the monetary base as we have been since November, but we won't be taking anything out of the punch bowl either.  This is probably a trial balloon.  If things go well for a few months, they may even stop reinvesting maturing debt.  If the markets falter, watch out for QE3.  My guess is things will stagger along for a few months, and then things could get ugly in the fall.  We'll see.