Fed economists say that at best, QE provides a moderate boost to growth, according a paper from economists at the SF Fed and the NY Fed. They say QE would have been far less effective without the Fed’s promise to keep rates low.
“Our analysis suggests that communication about when the Fed will begin to raise the federal funds rate from its near-zero level will be more important than signals about the precise timing of the end of QE3,” San Francisco Fed senior economist Vasco Curdia and New York Fed senior economist Andrea Ferrero wrote.
The study, if the FOMC believes it, diminishes the value of QE and makes tapering more likely. At this point, the financial risks of QE are beginning to outweigh the benefits.
