QE2

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QE2 is a bond-buying program launched in November of 2010 by the Federal Reserve.[1] According to a statement issued by the Fed in November of 2010, the purpose of the program - the second round of quantitative easing - was to boost job creation and inflation. At the time, the Fed said it intended to purchase $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month.[2] The Fed was expected to regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and would adjust the program as needed to best foster maximum employment and price stability.[3]

On June 22, 2011, in conjunction with the release of the Federal Open Market Committee (FOMC) statement, the Fed said it would end, as planned, its $600 billion bond purchase program in eight days. The central bank also said it would keep its targeted Fed funds rate at a historic low between 0 percent and 0.25 percent.[4]

Criticism Of The Program

Critics of the program have said that perhaps that the best that could be said for QE2 was that to the extent it has boosted stock prices, it helped some aging baby boomers cash out at slightly higher prices than they would have received otherwise.

The flood of cheap money that resulted from QE2 was said to help the big banks rake in profits; however, ordinary investors didn't buy into gains on Wall Street during the period of the program. Ordinary investors cashed out.[5] Others said simply that QE2 aggravated a decline in the U.S. dollar against other key currencies and boosted commodity prices, and this had a contractionary impact on the economy.[6]

References

  1. Corporate bond sales rise at year-end. Financial Times.
  2. What is Fed's QE2, and what will it do? Experts explain in everyday English. Dallas News.
  3. Press Release. Federal Reserve.
  4. Fed keeps rates on hold and says QE2 to end. MarketWatch.
  5. Who really benefited from QE2 anyway?. MarketWatch.
  6. Economists give their eulogy for QE2. MarketWatch.