People have been clamoring for
for more than a year. Now it seems the noise has reached a fever
joined the list of market forecasters predicting that the Federal
Open Market Committee (FOMC) will announce a third round of
quantitative easing at its monthly meeting this Thursday.
JPMorgan Chase (
Goldman Sachs (
had previously predicted that the Fed would take action this
Many are viewing last Friday's
as the tipping point.
Only 96,000 nonfarm jobs were added in August - almost 50,000
less than this year's monthly average. And though the
unemployment rate was trimmed from 8.3% in July to 8.1% last
month, the number was artificially inflated by an estimated
368,000 people giving up on their job searches. Participation in
the U.S. labor force has now reached a 30-year low.
The report was disappointing enough that many economists now
believe Ben Bernanke and the Fed will be compelled to finally
implement a third round of quantitative easing.
Quantitative easing is a monetary policy through which the
Federal Reserve buys billions of dollars of Treasury bonds and
mortgage-backed securities to stimulate economic growth.
Quantitative easing is typically utilized when other stimulus
measures - such as near-zero interest rates and Operation Twist -
Interest rates have been near zero for several years now.
- a Federal program through which the Fed buys long-term Treasury
bonds and sells short-term Treasuries - was implemented last
September and extended this June. Neither measure has done much
to lift up a struggling U.S. economy.
So, as with QE1 in late 2008 and QE2 in late 2010, a third
round of quantitative easing may be the Fed's last resort.
Bernanke has been hinting at QE3 for months. With the chorus
in favor of it growing louder by the day, perhaps this is the
week he'll take action.