QE3 does not help the FED’s own forecasts

The announcement of QE3 (third round of quantitative easing) has sparked another round of heated debates about its effects. There is no consensus and the views go from positive effect on GDP and employment to hyperinflation. But what does the FED think?

All I see the FED doing is letting the markets down slowly

The financial markets are giddy today based on what they think the FED said on their last meeting. Pretty much every news agency reads the FED minutes as a hint that QE3 is in the cards. I don’t. The minutes say no such thing. Yes there is a discussion were many or several see merits of further asset purchases while many or several see risks. There is no indication that the MPC members will go either way. Here is what the minutes said:

Bancile centrale nu au vesti bune pentru cresterea economica

Saptamana trecuta am avut trei banci centrale care au anuntat deciziile de politica monetara: ECB, The Fed si BNR. Deciziile nu au surprins piata dar comunicatele contin informatii noi cu privire la cum vad cele trei institutii evolutiile viitoare ale cresterii economice, inflatiei si dobanzilor.

Still no QE3

The FOMC statement offers more information, in my view, that does not support  another QE. Here are the main ideas from the FOMC statement which I find most interesting and revealing (emphasis are my own)

BCE trateaza riscul de credit cu morfina

Incepand cu luna august 2011 am tot auzit de pericolele crizei de lichiditate. Acesta a fost principalul motiv care a stat la baza ofertei de lichiditate a Bancii Centrale Europene (BCE), ce nu a tinut cont daca acela care imprumuta este solvabil sau nu. Iar economistii si policienii care pledeaza pentru acest rol al bancii centrale au castigat deocamdata dezbaterea.
Articol aparut in Finantistii

Prognosis negative from the ECB, the Fed and the RBA

We had a very interesting week so far. Interest rate decisions from few major central banks – Reserve Bank of Australia, FED and the ECB –Greece took euro zone to the gates of abyss and back and the start of the G20 meeting. Still, it is not over and we have to wait for the week-end most “interesting” decisions in recent history were taken during this time.