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Opinion
Mohamed A. El-Erian

Is Fed’s Bill-Buying Spree QE? Does It Matter?

It’s probably QE Lite, but what it’s called matters less than the challenges facing central banks.

QE or not QE? That is not the most important question.

QE or not QE? That is not the most important question.

Photographer: Daniel Brenner/Bloomberg

After Federal Reserve Chair Jerome Powell stressed last week that the bank’s plan to buy Treasury bills was in no way quantitative easing, and several of his colleagues followed his lead, economists and market participants began to debate what QE truly means. It’s an issue that’s hard to resolve analytically, yet the discussion may provide insights into the thinking not only of the Fed but also some other systemically important central banks as they face a deepening conundrum.

Speaking on Oct. 8 to the 61st annual meeting of the National Association for Business Economics, Powell said that the Fed’s policy to buy $60 billion of Treasury bills a month through the second quarter of 2020 “should in no way be confused with the large-scale asset purchase programs that we deployed after the financial crisis,” or what is commonly referred to as QE. Instead the Fed’s purchases  are intended to calm the wholesale funding market, commonly referred to as the repo market.