The end of the second round of quantative easing will not have much effect on the US economy, says Keith Wade, the chief economist and strategist for Schroders.
There has been much speculation as to what effect the end of the Federal Reserve’s QE2 program will have on a fractured US economy that is beset by rising unemployment and inflationary pressures.
Wade argues that since a lot of the $600 billion stimulus package has remained in the banks, QE2 has had a “minimal impact.”
QE2 has also “helped to boost market confidence” in signalling that the government is backing efforts to support a full recovery. This has, in turn, led to some much needed downward pressure on the dollar.
As the program ends, Wade says there is likely to be some temporary volatility felt across the markets until it becomes clear that it “is not going to have a significant effect on the economy.”
“We think the dollar could be a bit firmer and the equity market might be a little bit weaker,” says Wade.