Two Cheers for Tapered Quantitative Easing

The Federal Reserve made waves when it announced it was rolling back its quantitative easing program. Looking more closely, one finds it’s actually a very minor policy change, moving from $85 billion to $75 billion per month. Over at the Washington Times, I encourage the Fed to taper back the rest of the QE program, and point out that the Fed may be sending a subtle political message about how presumptive incoming Fed Chair Janet Yellen will approach inflation:

Johns Hopkins University economist Steve Hanke argues that Ms. Yellen is more hawkish on inflation than her dovish reputation suggests. The tapering announcement seems to confirm Mr. Hanke’s thesis. As the Fed’s current vice chairman, she already has significant say on Fed policy. She has publicly supported the new Basel III reserve banking standards, which would require banks to hold more of their capital in reserve. That would decrease the amount of money in circulation — the exact opposite effect of quantitative easing — and help keep inflation in check.

There are plenty of problems with the Basel III standards, but this would be one positive effect. Read the whole thing here.

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