The Federal Reserve is now just waiting for Godot. In somewhat absurdist fashion, the central bank said on Wednesday it would keep buying $85 billion of bonds each month, though there doesn't seem to be any clear idea of when it should stop or obvious evidence the year-old programme is helping the economy. The recovery isn't apt to accelerate soon. Taper expectations might be in vain.
Since the Fed began the third iteration of its quantitative easing programme known as QE3, the US economy has created 2.2 million jobs. That compares to 2.1 million in the previous year. It is at least a tacit indication that the Fed's $1 trillion of purchases of Treasury bonds and agency mortgage-backed securities haven't done much to fulfill its task of fostering maximum employment.
The supply of money, meanwhile, hasn't been keeping up. The broader M2 measure, which includes savings deposits and other funds, was up by $700 billion in the year to October 14, and the closely watched Money of Zero Maturity produced by the St Louis Fed gained just $860 billion. Both increased at a faster rate than nominal GDP, but more slowly than might have been expected given the scale of the Fed's infusions.
More From This Section
At this stage, it's hard to see what triggers could inspire the Fed to start curtailing its bond purchases. The housing rebound is steady but unspectacular and employment gains are slow-going.
The FOMC's moving targets have left investors wary. If tapering doesn't start before Fed Chairman Ben Bernanke leaves in January, it is bound to create more question marks about how and when his proposed successor, Janet Yellen, will act. As in Beckett's drama, the delay could soon start to feel endless.
