On Deck for the Fed: QE3, GOP Backlash

Markets soar on widely expected new round of stimulus
By Rob Quinn,  Newser Staff
Posted Sep 12, 2012 7:54 AM CDT
Federal Reserve Chairman Ben Bernanke speaks to educators in the board room of the Federal Reserve last month.   (AP Photo/Manuel Balce Ceneta)

(Newser) – Markets have soared in the expectation that the Fed will announce fresh steps to boost the US economy at the conclusion of its two-day meeting tomorrow—making it all the more likely that a stimulus will be forthcoming. Fed Chairman Ben Bernanke is widely expected to announce a third round of bond-buying to pump cash into the system, a move known as "quantitative easing," the AP reports. Last month, Bernanke called persistently high unemployment "a grave concern" that inflicts "enormous suffering" and said the previous two rounds of easing had created 2 million jobs.

But a new stimulus this close to a presidential election is sure to anger conservatives, and could result in moves to limit the Fed's authority. Another round of bond-buying would be "another shovel full of dirt as the Fed digs its own grave as a politically independent institution," an economics professor tells the Los Angeles Times. The most recent precedent is Alan Greenspan's decision to cut the Fed's benchmark interest rate to its lowest level in decades in September 1992, the New York Times reports. But the cut wasn't enough to get George HW Bush, whose administration had sought quicker and more forceful action, re-elected that November.

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