Is QE3 on the Horizon? Goldman Sachs Thinks So

With tumultuous global markets wreaking havoc on investors and policymakers alike, many eyes have turned to the U.S. Federal Reserve to restore confidence. If the FOMC's statement Tuesday is any indication, investors could be in for an interesting few years.

The Fed announced that it would keep interest rates at record lows until mid-2013. The extended period is an indication of the Fed's concern over the country's staggering growth.

Interestingly, in a note published Wednesday, Goldman Sachs (NYSE: GS) said a third round of quantitative easing by the Federal Reserve is likely.

"We now see a greater-than-even chance that the FOMC will resume quantitative easing later this year or in early 2012. We have changed our call because today's statement suggests that the committee's reaction function to incoming economic news is more dovish than we had previously thought," Jan Hatzius, chief economist at Goldman Sachs, noted.

Quantitative easing is one of the more controversial methods that the Federal Reserve has used to promote growth. The Fed effectively buys assets from financial institutions with newly-created money.

The Federal Reserve has already purchased hundreds of billions of dollars worth of securities in separate rounds, known as "QE1" and "QE2". Concerns have been raised about high inflation and the continued creation of new money.