Fed expected to end QE3, but could employ again if needed
Federal Reserve officials meeting Tuesday and Wednesday are virtually certain to end their latest bond-buying program, but they won’t be retiring the policy for good.
Their recent comments show bond purchases are now an established part of the Fed’s policy tool kit that they could employ again in times of deep economic trouble. The central bank has employed three rounds of bond-buying programs since the 2008 crisis, first to stabilize the financial system and later to spur stronger growth.
Several Fed policy makers say they think the latest round of Treasury and mortgage-bond purchases, begun in late 2012, helped lower long-term interest rates, boosting hiring and growth. But they also see a high bar to launching more bond buying—known as quantitative easing, or QE—seeing it as a last resort to use only if very low interest rates and communications efforts were to fail to reverse a sharply worsening economic outlook.
“I think QE is quite effective,” Boston Fed President Eric Rosengren said in a recent interview with The Wall Street Journal, describing the approach as an option for dealing with an adverse shock to the economy.
