WASHINGTON - September 21, 2010 - How much of a boost to a U.S. economic recovery could another trillion dollars or two buy? That's a tricky question for the Federal Reserve when it meets Tuesday to debate what would warrant pumping more money into the financial system.
To battle the financial crisis, the Fed bought $1.7 trillion of longer-term Treasury and mortgage-related bonds, supplementing its pledge to keep interest rates near zero for a long time.
Now, faced with a 9.6% jobless rate and below-target inflation, Fed policymakers are trying to gauge how much they could achieve if they resume massive quantitative easing.
Few analysts expect the Fed to launch a new round of bond buying this week, and uncertainty over the impact of fresh moves may be a factor keeping the central bank on the sidelines.
"I think part of the hesitancy of the committee to use quantitative easing a second time around relates to views of its effectiveness," said Vince Reinhart, a former Fed staffer.
