The first installment was in 2009. The second in 2010. And the third could happen in 2011. This is the timeline of the monetary stimulus packages doled out by the Federal Reserve (the United States? central bank), which pumped money into the economy by buying debt across the markets. The technical name is known QE, which stands for quantitative easing.
QE attempts to introduce a greater quantity of money to a financial system. Until now there have been two: QE1 and QE2, and the leader of the Fed, Ben Bernanke, opened the door for QE3.
?The possibility that recent economic frailty could become worst than we expected and that risks of deflation could return could both imply a need for additional stimulus packages,? he said yesterday in his weekly appearance before the Senate.
Beforehand, he answered a senator?s question by driving home that ?if inflation figures aren?t significant, the QE3 is an option.?
His message suggested a greater importance because minutes from the Fed?s June meeting barely indicate that they would consider QE3 as a possibility. Above all, he was daring American investors (and also European investors) that had broken a three-day losing streak on Wall Street. At midday, the Dow Jones rose 1.2% to 12.597.6 points, and the S&P 500 rose 1% to 1.326.5 points.
But it wasn´t for naught. The possibility that the Fed will pass a third round of quantitative easing is an invitation for investors to put their money in risky shares. Not in vain, raising the price of shares is one of the acknowledged objectives of this strategy. This was evident in the QE2, for example. Between November 2010 and June 2011, the Dow rose 12.5%.
