Nope, QE3 Still Ain’t Coming

I’m amazed how many people claim that the Federal Reserve is about to embark on a third round of bond buying (better known as quantitative easing or QE). This is despite the Fed’s repeated assertions that it’s not coming.

Just the other day, SocGen said that QE3 is coming soon. Even 36% of top economists think QE3 will come sometime this year.

Where do they get this idea?

Last June, I wrote a piece titled “Sorry Folks, QE3 Ain’t Coming.” and I feel like I have to say it again: QE3 ain’t coming.

The Fed released the minutes of its January meeting today. The media has latched on to a very minor mention of QE3:

A few members observed that, in their judgment, current and prospective economic conditions–including elevated unemployment and inflation at or below the Committee’s objective–could warrant the initiation of additional securities purchases before long. Other members indicated that such policy action could become necessary if the economy lost momentum or if inflation seemed likely to remain below its mandate-consistent rate of 2 percent over the medium run.

That’s it? That’s hardly anything. All it says is that “a few” members think QE3 could at some point be needed. That’s a giant leap from, “it’s coming.” Furthermore, the political backlash would be intense, especially during an election year.

The fact is that the employment outlook is (slowly) improving. There was never any real pressure for QE3 and whatever there was, has faded. I’m not saying whether it’s needed or not, but the idea that QE3 is coming is simply a pipedream.

Posted by on February 15th, 2012 at 2:26 pm


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