William Dudley, President of the Federal Reserve Bank of New York, said the following about QE2 and QE3 while at a conference in Hong Kong. "I’d be very surprised if we didn’t complete QE2. After that, though, the hurdle for QE3 is higher . . . One reason we embarked on QE2 was we really were worried about the risk of deflation in the U.S . . . Now the risks of deflation are greatly diminished. So one of the motivations behind QE2 is no longer in place.”
So QE3 isn't a given, but we can't completely rule it out either. The unemployment rate continues to fall, but it's still not at a satisfactory level yet. Quantitative Easing allows the government to stimulate the economy without having to fight Congress for more money; it also makes Americans feel better about the economy, since the stock market keeps on going up, which is particularly useful when you're up for election in the near future. But of course you're going to get inflation with all of this printing money, so the administration has to decide just how much inflation it can create before it starts to derail the progress the economy is making.
That being said, as investors we're enjoying the benefits of QE in the market.
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