Get ready for QE3 if things don’t get better soon
Ben Bernanke appears to be reluctantly gearing up for a third round of large-scale Federal Reserve bond buying, so-called QE3. Millan Mulraine of TD Securities captures just how likely further monetary easing is becoming following the Fed’s decision on Wednesday to expand Operation Twist.
The burden of proof may now be on the incoming data to prove that a third round of large-scale asset purchases may not be necessary.
Just under two months before the central bank’s yearly gathering at Jackson Hole – where Bernanke announced QE2 – the Chairman emphasized the path of the job market will be a key driver of any decision to further expand the central bank’s $2.8 trillion balance sheet. He told reporters at a press conference:
If we don’t see continued improvement in the labor market, we will be prepared to take additional steps if appropriate.
That suggests another crummy jobs report for June could push policymakers over the edge, potentially even as early as its July 31-August 1 meeting.