Here’s what the Fed fears: a decades long slide into deflation like that experienced in Japan since the 1990s. They are willing to err on the side of commission rather than omission to prevent that eventuality.
If the US economy does not need quantitative ease and inflation breaks out, they know how to deal with that: just jack up rates.
If its slides into a deflationary spiral, there is no one on earth really knows how to reverse it. They’d rather buy $500 bln or a trillion dollars of insurance than take the chance of having to spend even more down the road.
Don’t forget, half of the people on this site chide the BOJ for not following up their policy shift to QE with more intervention. Most are the same people who berate the Fed for being too aggressive.
Pick your poison: A central bank that is not aggressive enough or one that is too aggressive. The Fed has already decided which it will be…
