Wade: End of QE2 will not derail recovery

The end of QE2 this month will have a limited impact on the global economic recovery, according to two senior economists at Schroders.

The Federal Reserve has announced plans to end its QE programme in June as planned, sparking concerns the move will trigger a return to recession and a bear market in risk assets. But Keith Wade, chief economist and strategist at the firm, said the effects of the withdrawal of stimulus would be muted because QE’s main impact has been to increase bank reserves. “The credit multiplier has fallen as banks have not lent their increased reserves on to the private sector, thus limiting the effect on activity. From this perspective the end of QE should not derail the recovery,” Wade said. ...