QE RIP

By R.A., A.C.M. & L.P.

The end of quantitative easing in America

ON OCTOBER 29th the Federal Reserve brought to a close the monetary-stimulus programme known as "QE3". The Fed first began using quantitative easing—the purchase of assets like government debt and mortgage-backed securities with newly created money—in late 2008, after its main interest rate was cut all the way to zero. By injecting liquidity into rattled markets and lifting asset prices quantitative easing is meant to boost investment and to raise growth, hiring, and inflation (all of which plummeted in the recession). Although the initial bout of QE seemed to work, the Fed had to restart purchases in late 2010 and again in late 2012 when economic momentum slipped, in the process accumulating more than $4 trillion in assets. It could perhaps have added even more: expectations for future inflation have sunk to the lowest level in three years.