Immediately after Federal Reserve policymakers announced a plan to pump more money into the economy with a policy known as "quantitative easing," Ann Owen, the Henry Platt Bristol Professor of Economics and director of the Arthur Levitt Public Affairs Center, spoke with a National Public Radio (NPR) reporter about possible outcomes. The interview was part of a segment broadcast on NPR’s All Things Considered program on Nov. 3 titled “Fed To Buy $600 Billion In Treasury Bonds.”
Owen said that given the state of the economy, the Fed had to do something. Normally, it would lower the target for the Fed funds rate, a short-term interest rate. But, she pointed out, that is already down at zero, precluding any further lowering.
“They're trying to change the economic behavior of consumers and firms,” Owen said. “They're trying to get them to spend more. So one way of doing that is to lower the cost of their spending by lowering interest rates.”