Notwithstanding skepticism from some economists about the U.S. Federal Reserve Board’s latest effort to stoke the economy with another round of quantitative easing, there are signs that the Fed’s efforts are working.

In a research note published Thursday, IHS Global Insight suggests that the Fed’s efforts to stoke growth with some unconventional policy measures appears to be paying off in the form of some good economic news.

On Wednesday, the U.S. Federal Open Market Committee finally delivered on its long-awaited plans for further quantitative easing, launching a US$600-billion program to purchase long-term securities. IHS notes that the announcement came as no surprise, as it has been expected for some time. And, it says that, when added to existing policy measures, the Fed could be expanding its balance sheet by another $900 billion, which is not as high as some expected.

Moreover, it sees signs that these policies are working. “The good news is that mortgage rates have tracked downwards to near 4.25%, and the stock market has risen not only in response to recent positive earnings reports, but in anticipation of some positive benefits to the economy from the Fed’s recent actions,” the firm says.

IHS Global Insight expects long-term bond yields will probably ease over the next several weeks reaching near 2.5% in early 2011; and, as a result, mortgage rates are expected to remain at historically low levels for the next several months too.

“More good news is that the Fed’s actions over the past several months are already starting to have a positive impact on economic activity, with the ISM indicators for both manufacturing and services perking up in October, and recent indicators also pointing to slightly stronger private-sector job growth as we enter the fourth quarter,” it notes.

“The economy is slowing digging itself out of a deep hole. The Fed is making the right moves here to nudge the pace of digging up a little,” it concludes.

IE