The Federal Reserve indicated yesterday it will continue its program of bond-buying (quantitative easing), and could in fact ramp it up.
Facing the risk of a fourth straight summertime slowdown, Federal Reserve officials raised the prospect of increasing the monthly pace of bond buying above $85 billion to guard against any slump in growth or employment.
The Fed’s statement yesterday that it’s “prepared to increase or reduce the pace of its purchases” was a signal that its $3.32 trillion balance sheet is a flexible tool for monetary policy that can be adjusted up or down, like interest rates. The statement, released in Washington, countered discussion of the timing of a reduction in purchases at the Fed’s March meeting.
The Philadelphia Federal Reserve chairman, Charles Plosser, has been a long-time critic of the quantitative easing money printing program, noting that the longer it continues the more difficult it will be to scale it back without disrupting the economy.