by John H. Makin
American Enterprise Institute
August 16, 2012
Economic Outlook
This summer, the US Federal Reserve Bank (Fed) and the European Central Bank (ECB) claimed they would strive to address fundamental structural problems in the US and European economies. Yet neither central bank has rolled out concrete measures to achieve these goals. Even if the Fed were to undertake additional quantitative easing in September, there is no guarantee that this would effectively reduce US unemployment or increase economic growth. If enacted, ECB lending programs would provide only temporary relief to peripheral sovereign borrowers such as Spain and Italy. Furthermore, the Fed seems to lack confidence in its own ability to spur economic growth, and the progress of the ECB’s loan program greatly hinges on upcoming decisions by German courts. The most recent round of Fed and ECB meetings thus serve as reminders that in the aftermath of the 2008 and 2010 economic crises, central banks are being asked to promise more than they can deliver.



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