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Will “Quantitative Easing” Trigger Inflation?

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  • Kenneth D. Garbade

Abstract

The Federal Reserve announced on November 3, 2010, that in the interest of stimulating economic recovery, it would purchase $600 billion of longer-term Treasury securities. The announcement led some commentators to conjecture that the Fed’s large-scale asset purchase (LSAP) program—popularly known as “quantitative easing”—is more likely to trigger inflation than stimulate recovery. This post discusses why those concerns may be misplaced, and also why they are not without some basis. A recent Liberty Street Economics post by James J. McAndrews—“Will the Federal Reserve's Asset Purchases Lead to Higher Inflation?” addressed the same issue from a broader perspective and came to a substantially similar conclusion.

Suggested Citation

  • Kenneth D. Garbade, 2011. "Will “Quantitative Easing” Trigger Inflation?," Liberty Street Economics 20110608, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:86750
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    Keywords

    Quantitative Easing;

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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