Fed's QE2 programme could grow to US$1.5 trillion, say analysts

Analysts expect the US Federal Reserve to pump more cash into the economy if its US$600 billion bond-buying plan fails to prevent deflation.

Some market watchers said the Fed's so-called quantitative easing (QE2) programme could eventually grow to as much as US$1.5 trillion.

High unemployment and fear of deflation have already prompted the US Federal Reserve to take action.

Some market watchers said the use of quantitative easing to stimulate growth may last for some time - despite the criticism levied at the US by other countries, including China.

Kevin Logan, Chief US Economist with HSBC, likened the Fed's move to a leaky bucket.

"It's almost as if the Federal Reserve is trying to put out a fire with a leaky bucket, but it's the only bucket it has. So they're going to try and continue to throw water on that fire, but meanwhile the liquidity leaks out.

"Is the Fed being reckless? I don't think so. As I said, the earlier programme was quite successful in stabilising the financial markets and the housing market." (more)