Home Logon FTA Investment Managers Blog Subscribe About Us Contact Us

Search by Ticker, Keyword or CUSIP       
 
 

Blog Home
   Brian Wesbury
Chief Economist
 
Bio
X •  LinkedIn
   Bob Stein
Deputy Chief Economist
Bio
X •  LinkedIn
 
  QE Infinity and Beyond
Posted Under: Government • Fed Reserve
Supporting Image for Blog Post

 

The Federal Reserve has been extremely aggressive since the Coronavirus and related shutdowns hit the US economy and made it clear today that it will continue to be so until the US economy has gotten back on its feet.  This includes keeping short-term interest rates near zero, continuing to expand its balance sheet with purchases of Treasury debt and mortgage-backed securities (both residential and commercial), as well as using facilities to maintain liquidity and the flow of credit to households, businesses (both large and small), and state and local governments.

Chairman Powell made it clear at his press conference that the Fed will continue to use the full range of its legal powers "forcefully, proactively, and aggressively" and wants to see an economic recovery that is "as robust as possible."

After the Great Recession, the Fed didn't raise short-term rates again until December 2015, well into the recovery, and when the unemployment rate was 5.0%.  Given the Fed's commitment to make sure the economy heals from the current crisis, don't expect the Fed to raise rates for the next couple of years, perhaps not until 2024.  As Chairman Powell said at his press conference, the Fed won't be in any hurry to raise rates. 

Does this mean higher inflation?  Not right away.  If anything general price measures will keep falling in the short term due to lower commodity prices.  After that, we expect a return of general price increases, but not rampant inflation.  Yes, the supply of money is growing by leaps and bounds.  But the demand for money by households and businesses has also grown enormously.  Cash is King right now and likely to remain so over the medium term.  One key issue is how long the federal government maintains very generous unemployment benefits in which a large share of workers can earn more through July by not working than by going back to work.  If these benefits remain in place into 2021, we may see faster inflation as the businesses that are growing and hiring need to ramp up wages to entice people back to work.  Time will tell.

Looking forward, expect more of the same in 2020: continued expansion of their balance sheet and short-term rates near zero. 

Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist

Click here  for PDF version

Posted on Wednesday, April 29, 2020 @ 3:57 PM • Post Link Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
Search Posts
 PREVIOUS POSTS
Coronavirus and Economic Update 4/29/20
The First Estimate for Q1 Real GDP Growth is -4.8% at an Annual Rate
Reopening America
GDP: Bad, And Getting Worse
M2 and C&I Loan Growth
New Orders for Durable Goods Declined 14.4% in March
Coronavirus High Frequency Data
New Single-Family Home Sales Declined 15.4% in March
Coronavirus Update & Economic Outlook
Existing Home Sales Declined 8.5% in March
Archive
Skip Navigation Links.
Expand 20242024
Expand 20232023
Expand 20222022
Expand 20212021
Expand 20202020
Expand 20192019
Expand 20182018
Expand 20172017
Expand 20162016
Expand 20152015
Expand 20142014
Expand 20132013
Expand 20122012
Expand 20112011
Expand 20102010

Search by Topic
Skip Navigation Links.

 
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
Follow First Trust:  
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2024 All rights reserved.