Reading the answers above I think there is a confusion. FED does not really control the money supply in the economy. It only controls the M0, which is the base money. The majority of the stock that is available in the circulation is primarily determined by commercial banks. What we have seen recently is that the amount of credit issued by these banks is quite limited and not large enough to put inflationary pressures. More specifically, what QE does is it substituted commercial bank risky assets (e.g. mortgage backed securities) into hard cash, which is safer, hence the commercial banks are supposedly more willing to issue credit.

Regarding the question about other factors, one should consider inflation expectations. If for the past 10 years the inflation has been 2%, it is quite likely I will believe it to be the same, regardless whether it is recession or not. Hence such things as employee contracts and trade unions agreements agree upon that the next years wage increase will be 2% to mach the inflation. This translates to an increase in 2% in prices (just a crude example, but you can refer to P. Volker's fight with inflation in 1980s, when everyone was used to above 10% inflation). The point being is that people expectations about inflation are rather rigid, you can expand the money supply as much as you want, but it will not budge in the short-run.

Reading the answers above I think there is a confusion. FED does not really control the money supply in the economy. It only controls the monetary money. The majority of the stock that is available in the circulation is primarily determined by commercial banks. What we have seen recently is that the amount of credit issued by these banks is quite limited and not large enough to put inflationary pressures. More specifically, what QE does is it substituted commercial bank risky assets (e.g. mortgage backed securities) into hard cash, which is safer, hence the commercial banks are supposedly more willing to issue credit.

Regarding the question about other factors, one should consider inflation expectations. If for the past 10 years the inflation has been 2%, it is quite likely I will believe it to be the same, regardless whether it is recession or not. Hence such things as employee contracts and trade unions agreements agree upon that the next years wage increase will be 2% to mach the inflation. This translates to an increase in 2% in prices (just a crude example, but you can refer to P. Volker's fight with inflation in 1980s, when everyone was used to above 10% inflation). The point being is that people expectations about inflation are rather rigid, you can expand the money supply as much as you want, but it will not budge in the short-run.