Bullard stated that ahead of the November FOMC meeting, the policy change had been largely priced into markets, and the financial market effects were conventional. In particular, he said, “real interest rates declined, inflation expectations rose, the dollar depreciated, and equity prices rose.” Bullard added, “These are the ‘classic’ financial market effects one might observe when the Fed eases monetary policy in ordinary times.” Bullard concluded that “quantitative easing has been an effective tool, even while the policy rate is near zero.”
Since QE2 was announced, the economic outlook has improved, Bullard noted. “The natural debate now,” he said, “is whether to complete the program, or to taper off to a somewhat lower level of asset purchases.”