Noah Smith, Columnist

QE Works. It’s Just Not a Slam-Dunk Recession Stopper.

With interest rates still very low, the Fed has only one tool left to fight the next recession.

February 10, 2020 at 12:00 PM UTC

Noah Smith is a former Bloomberg Opinion columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.

That would be a yes.
Photographer: Andrew Harrer/Bloomberg

Provide news feedback or report an error

Site feedback:

Take our Survey

This article is for subscribers only.

The U.S. economy seems to have reached a comfortable equilibrium, with low unemployment and steady growth. But if and when a recession comes, the Federal Reserve is going to have to fight it. The traditional tool for stabilizing the economy — interest rate cuts — won’t do much because rates already are so close to zero that further reductions probably won’t make much difference:

Forward guidance — promising to keep rates low for a long time after a recovery — also probably isn't going to be very effective. Who believes what the Fed says today about what it will do in the distant future? And how much difference would that even make for the plans of the typical company or consumer?