MIT professor and finance expert Andrew Lo has voiced agreement with Carmen Reinhart that further quantitative easing could damage the recovery.”Financial repression is a very serious issue and it will slow the recovery,” said Lo in an interview with the Financial Times‘ Michael Mackenzie
In an op-ed at Bloomberg published Sunday, Reinhart said further accommodation would amount to “financial repression” as bond holders and savers get pinched for keeping assets on the sidelines.
Lo went a step further, saying QE3 would not spur GDP growth.
“Traditional monetary policy suggests low rates spur investment, but consumers drive – or, in this case, don’t drive – the economy,” he said.
We hope to learn more about the Fed’s intentions for QE or other forms of monetary easing when it concludes its Federal Open Market Committee (FOMC) meeting today.