The big news in the US today was the Federal Reserve's Open Market Committee's decision to extend its simultaneous purchase of longer-dated Treasuries and sale of shorter-dated ones. This effort, dubbed Operation Twist, was set to expire at month's end and so, with weakening growth in the US, the Fed decided to lengthen the program through the end of the year. The FOMC decided to keep the operation relatively small, opting for $267bn. This intervention comes after the Bank of England's minutes revealed that the BOE narrowly decided not to continue its quantitative easing program. Expectations are that the BOE will go QE next month.
But with both mortgage and interest rates in the US and the UK at record lows, one must ask whether QE makes any sense. In my view it does not. In particular...
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Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty five years of business experience. He has also been a regular economic and financial commentator in print and on television for the past decade. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.