Where Did Bernanke Leave QE3?

Yesterday Federal Reserve Chairman Ben Bernanke addressed the public and press, speaking briefly on the FOMC’s decision to make no moves on interest rate levels this month. Per usual, the chairman’s comments drew much attention, criticism, and speculation based on possible “hints” in his dialogue and things he mentioned or omitted in his address. One item that investors and economists were particularly curious about was the future of the Fed’s monetary policy initiatives, and the potential launch of a “QE3.” Bonus: Quantitative Easing: Your Ultimate Cheat Sheet to the Monetary Policy.

As was expected, Bernanke spoke of the coming end of “QE2” policy in the next two weeks, saying that the Fed would cease its purchase of securities, though it would still reinvest the principal for some time after that. No mention of further QE was hinted at or spoken of. When questioned about what would have to happen to prompt the Fed to reinitiate a monetary policy easing intiiative, Bernanke declined to speculate.

It seems as though the FOMC and Bernanke are worn from the lackluster impact all their money moving has had in early quantitative easing attempts. The chairman seemed notably more pessimistic (or realistic?) yesterday, than he did in his last speech several weeks ago. Yesterday he spoke about the “very painfully slow” recovery in the job market, sharing projections that it would be “some years” before a return to near full employment was likely. Bernanke also acknowledged certain “more permanent factors” and structural problems in the American economy that he had previously refused to accredit for contributing to the slowdown.

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The Fed Chairman’s outlook on the economy has worsened (downgrading GDP projections for 2011) in the short term, but it seemed unlikely that he, or the FOMC, is going to “take further action” in moving interest rates or in the form of a money injection, any time soon. Or in Fed-speak, for an “extended period.”