Wednesday saw Goldman Sachs saying that the Federal Reserve is likely to launch QE III (a third phase of quantitative easing) with the Federal Reserve’s promise of keeping interest rates at low levels for a minimum period of 2 years at its back.
Chief economist at Goldman Sachs, Jan Hatzius, said that the likelihood of a resumption of quantitative easing in the first half of 2012 or in the latter part of 2011, that’s this year, stood a greater chance. They had amended their call, reason being that the reaction function of the committee to incoming economic news turned out to be more pacifistic than what they had earlier thought.
A lot of aggression was seen (much more than was expected)in both the measures – a bias toward further easing policy as well as clear commitment of keeping the policy rates low through mid-2013 , resulting in Goldman sketching the third phase of Quantitative Easing following the earlier bond-purchase program worth $600 billion which ended in the month of June.
In spite of facing 3 dissents in the committee which makes policies, Ben Bernanke, chairman of the Federal Reserve, went ahead with the promise of keeping interest rates low within a particular time period; this is an indication of the belief of the remaining central bank that fresh easing is imperative, thinks Hatzius.
