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Fed steers clear of shock and awe

Fed steers clear of shock and awe

Colin Barr 2010年11月08日
QE2 is getting off to a bit of a slow start.

????The Federal Reserve confirmed Wednesday it will buy another round of long-term Treasury securities in hopes of giving a wheezing economy a shot in the arm. The Fed said the economic recovery has been "disappointingly slow."

Shuffleboard, anyone?

????But then, the same might well be said of the Fed's plans. Sure, the Federal Open Market Committee said it will buy $600 billion worth of long-term Treasury securities between now and the middle of 2011, which is hardly a drop in the bucket.

????That's slightly above the $500 billion many observers had set as a baseline expectation for the rollout of the second round of quantitative easing, which is known as QE2 and is apt to prompt addled writers to make lame cruise ship jokes (see caption, right).

????But because the Fed's number falls well short of shock and awe territory and is stretched over eight months to boot, the monthly rate of new Fed Treasury purchases will fall below what investors have been expecting. The central bank plans on buying Treasuries at "a pace of about $75 billion per month," the Fed said.

????The minutes of the Treasury Borrowing Advisory Committee, released earlier Wednesday, shows the market expectation was about a third higher. "The presenting member stated that the market expects the Federal Reserve to purchase $100 billion per month," the minutes say.

????The committee, which comprises top bankers and fund managers who help the government gauge the market for its bonds, was right on another count, though. It said it expects the Fed to "leave the status of QE2 open ended, with purchases ultimately dependent on economic conditions."

????The Fed is right on that wavelength:

????The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability.

????Depressingly enough, the Fed is almost certainly on the same page as the Treasury borrowing panel on another front, though Ben Bernanke & Co. surely will never admit it.

????"The presenter also noted that the program should last six months to two years," the Treasury borrowing committee minutes say. If you think people were enraged this election season, wait till you see how they look after two years of QE2. Bon voyage.

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