Could We See QE 2.5?

Hold your horses stimulus bears, Ben Bernanke might not be done yet. According to this Bloomberg article, Federal Reserve Chairman Bernanke may do a "QE 2.5", as the economy appears to be too weak to just stop stimulus all together. This would require the Federal Reserve to invest the proceeds of maturing U.S. Treasuries, as they come due. Both Janet Yellen, and William Dudley, said that the economy is still too weak to start a reversal of monetary policy, despite comments from other Federal Reserve Presidents, such as Thomas Hoenig and Charles Plosser that stimulus should end as soon as possible because of rising inflation. Economists such as David Kelly at JPMorgan Funds see the Fed reinvesting around $17 billion in maturing mortgage debt with government debt. In comments obtained by Bloomberg, Kelly said, “It does make sense to reinvest for a while. “Then they could watch how bond yields react to that.” “If necessary, the Federal Reserve can also drain reserves by ceasing the reinvestment of principal payments on the securities it holds or by selling some of those securities in the open market,” Bernanke said during a semiannual monetary-policy testimony before the House and Senate last month. The Federal Reserve is going to hold its next meeting on April 27, and will be followed by Bernanke's first ever press conference, to discuss monetary policy. From the looks of things, Bernanke isn't going to let the patient quit just yet. The stimulus IV is going to keep pumping, for a little while longer.