The economic stimulus strategy known as Quantitative Easing 2 (QE2), according to Mark Luschini, economic strategist at Janney Montgomery Scott, has largely done its work, and should come to an end on schedule on June 30 with small likelihood of a follow-on QE3 to take its place.
Luschini (left) said in a report issued Friday that the need for QE2 had diminished as the policy had been largely successful in its aims—“to reflate the economy and risk assets to stimulate inflation and consumption through an increased wealth effect”—and therefore, although he expects the policy to remain in effect until its stated end date of June 30, he does not expect it to be followed by a QE3.
As Luschini pointed out, equity markets have come around; consumer prices are moving higher, and gains in employment are being reported. All these factors have combined to bring about the ends intended by the policy, although, added Luschini, the movement of interest rates upward raises questions about the effectiveness of QE2.