Resident Scholar Vincent Reinhart

I appreciate this opportunity to discuss aspects of quantitative easing with some former central bank colleagues on this panel.

Today's topic is monetary policy in a low interest rate environment. For the Federal Reserve, which will be my main focus, that means quantitative easing because the federal funds rate has already been effectively brought to zero. My presentation today will have three parts. First, I will discuss the channels through which quantitative easing works, because that sets up a basis to evaluate the policy. Second, in what may sound ironic, I will explain why quantitative easing is hard to quantify. That will say something about the ways central banks operate and about the current state of economics and finance. Last, I shall discuss the risks associated with quantitative easing. This will highlight the importance of having an exit strategy. In that regard, this discussion should not be viewed as relevant exclusively to the Federal Reserve. Any central bank confident in its ability to exit might be more willing to enter a period of very low interest rates.

Click here to download the full speech as an Adobe Acrobat PDF.

Vincent Reinhart is a resident scholar at AEI.