With QE2 now complete, the ongoing debate centers on whether the Federal Reserve Board should or will implement another round of quantitative easing. At the heart of the discussion is whether this economic stimulus program is necessary, based on its effectiveness and benefits, given possible unforeseen negative outcomes.
Though there are compelling reasons to implement a QE3, the current environment may not warrant increasing the Fed’s balance sheet further. Support for more stimuli is based on the fact that the economy is yet again in a soft patch, as it was last fall, and the contagion danger in Europe persists. The economy has certainly exhibited weakening metrics regarding jobs, housing, and overall growth in recent months. In addition, the sovereign credit crisis of Greece and the earthquake in Japan have caused some barriers to the current recovery.
However, there are significant differences in the current environment that would argue against the need for a QE3.
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