Fed's Plosser maintains that QE2 will probably be a failure

Right now the only real skeptic of QE2 that has a vote at the Fed is Thomas Hoenig of the Kansas City Fed.  Next year in 2011, he gets a companion.  Charles Plosser of the Philadelphia Fed will become a voting member next year. 

Next year his vote gets added weight.  And, he is more realistic on the limits of monetary policy and more wary of the unintended consequences.  Via WSJ:

"I am still somewhat skeptical that we will see much of a stimulative effect from the new round of purchases," and any positive influence may prove "modest," Federal Reserve Bank of Philadelphia President Charles Plosser said.

Given the way the Fed's decision to purchase $600 billion in longer dated Treasurys is designed to work, the official said "it is not clear to me that a further reduction in long-term interest rates will do much to speed up the reduction in the unemployment rate to more acceptable levels."

Plosser warned all the liquidity the Fed is pumping into the financial system, coming on the back of what it's done already, will "complicate our exit strategy." Given the challenges of tightening policy, Plosser said "the Fed will need to begin removing policy accommodation before the unemployment rate has returned to an acceptable level in order to avoid overshooting" and potentially generating unwanted inflation.


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