In American history, there have only been three instances of QE (Quantitative Easing), all occurring during significant economic stress, which means they happened during the reconstruction after economic recessions. The conditions for QE are always at zero interest rates or near-zero interest rates, indicating that it only occurs in the later stages of monetary easing, when the U.S. federal funds rate is at 0.25% or 0.
Typically, the average time required to move from a high interest rate (4.5%) to a zero interest rate is 16 months. Therefore, if a recession begins at the end of 2025 and the Federal Reserve implements significant rate cuts, it would take until mid-2027 to return to a zero interest rate or near-zero interest rate, after which the extent of the damage would be assessed to consider whether to initiate QE.
Additionally, the more severe the recession, the larger the pace of rate cuts by the Federal Reserve, and the intervals between cuts may become shorter.
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