Fed's Williams: QE3 asset buying may be expanded

This might be what the bulls need to push risk-assets higher. Analysts were worried that we might not be seeing further advances as many traders were front-running Fed's QE3 announcement. With the announcement now done and dusted, there is nothing to look forward to especially if US/Global economy remain sticky.

With this declaration from Williams, the market will have yet another reason to be hopeful again despite the doom and gloom all around.

The Federal Reserve could expand its stimulus package to include assets other than mortgage-backed securities if the U.S. economy fails to respond to its latest effort to jump-start the economy.

“Unlike our past asset-purchase programs, this one doesn't have a preset expiration date,” said San Francisco Fed President John Williams at a speech at the City Club on Monday. “Instead, it is explicitly linked to what happens with the economy.”

At its monetary-policy meeting on Sept. 13, the U.S. central bank said it would buy $40 billion worth of mortgage-backed securities per month as part of a stimulus plan colloquially known as QE3 — for Round 3 of quantitative easing.

“We might even expand our purchases to include other assets,” he said.

While the Fed is limited to what it can hold on its books, it can increase purchases of U.S. Treasurys, mortgage-backed securities, and debt issued by agencies such as Freddie Mac and Fannie Mac, Williams said.

He also suggested that the Fed could extend Operation Twist beyond the end of the year, when it is due to expire, and continue buying longer-term Treasurys if the economic recovery does not make substantial progress.

Via: MarketWatch