The Federal Reserve is currently winding down its large-scale asset purchase program. Also known as quantitative easing (QE), this program aimed to stimulate the economy through massive purchases of Treasury and mortgage-backed securities.
However, San Francisco Fed President John Williams now suggests the possibility that the Fed needs could start another round of QE.
“If we really get a sustained, disinflationary forecast … then I think moving back to additional asset purchases in a situation like that should be something we should seriously consider,” Williams told Reuters.
Since the financial crisis, we’ve seen three rounds of QE (that’s why we call it QE3).
Because the unemployment rate has improved significantly and growth has picked up substantially, most economists believe QE3 is it.
Williams’ comment, however, will certainly be fodder for those who are concerned with unlikely scenarios.
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