What QE3 would mean for the economy

The Federal Reserve wraps up its two day policy meeting today. It’s expected to announce whether it will pump more stimulus money into the U.S. economy. That would make a third round of so-called “quantitative easing.”

A quick reminder: quantitative easing is the “unconventional, controversial program of the Fed to buy long-term bonds, like U.S. treasuries,” according to Marketplace’s economics correspondent Chris Farrell. It’s an “attempt to bring down long-term rates even further,” he says, “which might encourage people to buy more cars and more homes.”

One of the things to focus on, he adds, is whether the Fed will do more bond-buying of mortgage-backed securities. Right now, the housing market is a bright spot in the economy, and this kind of action could bolster confidence.

Farrell also points out that a big impact of further quantitative easing would be to stabilize the global economy, as worries continue to grow about a slowdown in China and the ongoing debt crisis in Europe.