- The Fed has never been comfortable with QE3
- Many thought that QE ineffective
- Bernanke felt compelled to clear the path for Yellen
But it has boosted “Forward Guidance” to make up (or more than make up) for the “taper”.
According to the “outlook”, interest rates are likely to remain down into 2016 because inflation will likely still be below the Fed´s target.
The Fed would always say, about its securities purchases:
Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.
As the chart shows (weekly data) that never happened:
And that´s (according to Scott Sumner) “A classic example of how interest rates tell us very little about the stance of monetary policy.”
The stock market has mostly been on an uptrend:
And as David Beckworth illustrates, the QE + Forward Guidance group has performed significantly better than the Euro group (and better the more QE+FG):
Just imagine if the Fed had been clear on its communications, something it could have accomplished by stating a level target for NGDP!