Quantitative Easing vs Credit Easing

Abstract

On 18 March 2009 the Federal Reserve (Fed), the central bank of the United States, announced that it would pump an additional 1.15 trillion dollars into the financial markets. The Fed announced that “in the light of increasing economic slack, the Committee¹ expects that inflation will remain subdued and sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer run”.² To provide greater support to mortgage lending and housing markets, the committee decided to purchase up to $750 billion of agency- and mortgage-backed securities (MBS), bringing its total purchases on these securities up to $1.25 trillion. It would also increase its purchases of agency debt by $100 billion. Moreover, to help improve conditions in private credit markets, the Fed decided to purchase up to $300 billion in longer-term Treasury securities over the next six months.