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Sunday, March 06, 2011

Update on QE2: Likely to end in June as Scheduled

by Calculated Risk on 3/06/2011 10:38:00 PM

I always pay close attention to Fed stories from Jon Hilsenrath at the WSJ: Fed Unlikely to Remove Its Economic Stimulus Just Yet

Hilsenrath makes several key points:
• QE2 will probably end in June: "the securities purchase program ... is likely to end in June as scheduled."

• Tapering off of purchases unlikely: "Though the idea of tapering has received some attention on Wall Street of late, officials seem unlikely to want to follow that course this time ..."

• Fed will probably take a wait and see approach after June to see "how the economy performs later in the year without [QE2]."

• The "hawks" aren't pushing hard to finish early.

As I noted in When will the Fed raise rates?, this suggests a timeline for the earliest Fed funds rate increase:
• End of QE2 in June.
• End of reinvestment 0 to 2 months later.
• Drop extended period language a couple months later
• Raise rates in early 2012.

That is probably the earliest the Fed will raise rates - and it could be later in 2012 or even later ...

Summary for last week ending March 4th
Schedule for Week of March 6th