April 27, 2011

Not Renewing QE is Right Move, Economist Says

The Federal Reserve will likely announce today that its bond buying program will not continue after June. Stopping quanitative easing is the best for long-term growth, says Steven Horwitz, an affiliated scholar at the Mercatus Center at George Mason University and an economics professor at St. Lawrence University.

“The problem with quantitative easing is that it generates an artificial boom, so when it stops, there will be drop in economic activity. But we need to remember that the boom was artificial to begin with, and the best long-run decision is to stop the process now, even with its costs,” Horwitz said.

“Interest rates will go up, which makes it more difficult for those seeking to take out large loans such as mortgages. However, the rates on assets will also go up, meaning those who have not been profiting much from their investments will see an improvement,” he said.