The Federal Reserve’s innovative and controversial plan to pursue monetary policy through a second round of asset purchases, known as QE2, “worked in reality“ by helping avoid a bout of mild deflation akin to Japan, said James Bullard, president of the Federal Reserve Bank of St. Louis, on Thursday. “QE2 has shown that the Fed can conduct an effective monetary stabilization policy even when policy rates are near zero,” Bullard said. Late last summer, after the U.S. economy slowed down unexpectedly, the central bank decided to purchase $600 billion in Treasury securities in a second round of so-called quantitative ... (full story)