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Is there any limit to the Fed increasing the monetary base?
*Financial Times, by Krishna Guha, April 9, 2009
“Having downgraded its economic outlook, the Fed wanted to provide additional stimulus.
Officials settled on ‘substantial additional asset purchases’ because schemes to provide finance for credit markets were taking a long time to scale up.”
‘”Fed officials agreed the monetary base was likely to ‘grow significantly’ as a result of large-scale additional asset purchases – but still described this as a ‘consequence’ of policy rather than a channel through which it might work.
One official ‘in particular’ did put specific weight on the need for ‘sustained increases in the monetary base.’ But the Fed still stopped short of embracing a target for money growth or the logic of so-called ‘quantitative easing’ – leaving a difference between its avowed strategy and that of the Bank of England even though both are now buying government bonds.”
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