quantitative-easing-inflation-and-the-us-dollar

Quantitative easing, inflation and the US dollar

While the Fed has embarked on an aggressive ôquantitative easingö policy, it is not yet printing money and the policy will not lead to inflation in the next two years.

Chi Lo

January 05, 2009

The US Federal Reserve has started aggressive monetisation, dubbed ôquantitative easingö QE, since the collapse of Lehman Brothers and AIG in mid-September 2008. This is evidenced by the fact that the FedÆs balance sheet, as measured by the ratio of the monetary base plus excess reserve to GDP, has soared from $900 billion or 6% of GDP, which is about typical to over $2.3 trillion or 16% of GDP since then.

Reflecting this massive liquidity injection is the effective Federal funds rate 0.125% at the time of writing, which has been below the policy target rate since mid-September Chart 1. This is an upshot of the Fed oversupplying the banks...

FinanceAsia has updated its subscription model.

Registered readers now have the opportunity to read 3 articles from our award-winning website for free.

To obtain unlimited access to our award-winning exclusive news and analysis, we offer subscription packages, including single user, team subscription (2-5 users), or office-wide licences.

To help you and your colleagues access our proprietary content, please contact us at [email protected], or +(852) 2122 5222