Fed’s New Initiative QE3 is Likely to be a Failure

There is a possibility of bond purchasing by the Fed for the third time. However, it is not still certain whether this third round of bond purchase, referred to as QE3, is able to boost the ailing economy of USA. A lot of market speculations are there regarding the possible success or failure of the new initiative.

Ben Bernanke, the Fed chairman, said that they would think of taking additional steps if they did not observe any ongoing improvement in the labor market. Their ‘additional step’ is supposed to be the purchase of additional assets. However, Fed’s new initiative, known as QE3, in order to boost the economy is likely to become unsuccessful without the support of the bank.

The QE3 initiative will include purchasing assets and aggressively extending the balance sheet. However, it will not make any impact if the banks reserve the new cash and do not lend it out.