BEFORE 26-JULY
Strategic Briefing: Is The Fed Set To Roll Out
QE3? – The
Capital Spectator
An early FOMC preview: the menu of options – alphaville
/ FT
As usual we won’t play the percentages; instead we’ll just run through the possibilities and list a few of the potential complicating factors involved with each of them.
As usual we won’t play the percentages; instead we’ll just run through the possibilities and list a few of the potential complicating factors involved with each of them.
26-JULY
Examining the Fed’s other policy options – Self-Evident
So what are the “other tools” everyone is
talking about?
QE3 Talk – Stephen
Williamson
Bernanke's Dogs – The
Short Side of the Long
Doubts about Quantitative Easing and What they
Mean for the FOMC –
EconoMonitor
Bank of
America’s table and discussion of the options
Stephen Roach: Fed dangles QE3 ‘crack’ cocaine
as ‘raw meat’ for markets – Credit
Writedowns
So, the Fed is going to give the addict what it
wants because advocates of easy money are everywhere in both liberal and
conservative circles. Will it work though? No.
Another reason the Fed should do more – Free
exchange / The Economist
In the last rate cutting cycle (2000-2003) the
Fed cut its policy rate by around 5.5 percentage points. The rates firms had to
pay to borrow fell by 2.5 percentage points. This time (2007-2010) the Fed’s
cut was pretty much the same. But the rate solid American companies had to pay
to borrow in markets hardly fell at all
The point of further easing would not be to
alter the situation in Europe - THE POINT IS TO PREVENT THE SITUATION IN EUROPE FROM WASHING UP ON US SHORES.
One More Dance
– PIMCO
We are witnessing a synchronized slowdown
worldwide that is beginning to affect corporate profits. The most likely
right-tail event is the Federal Reserve launching another round of quantitative
easing.
27-JULY
Four Common Mistakes about the Fed – A
Dash of Insight
The Fed is Sidelined by the Upcoming Election -
The Fed Acts Based Upon the Stock Market - The Fed is Out of Ammunition - The
Fed Knows the Employment Data
Chuck Norris Central Banking Promoted by Fed
Official – Macro
and Other Market Musings
The ability of the Fed to shape expectations
such that the market does most of the heavy lifting has become known among
Market Monetarist as the Chuck Norris effect.
"It’s Been A Fun Ride, But Prepare For A
Global Slowdown"
– ZH
Bank of
America’s report looks at the Fed’s and ECB’s choices and gives hints on what
things to look at when measuring the effectiveness of the policies.
28-JULY
Don't the Markets NEED QE? - Europe Won't Deliver? - There is no plan?
- Even if the plan is implemented, nothing is fixed? - So Europe is fixed? - Is Draghi Dumb?
30-JULY
The data supports QE3 this week, but the data
also supported QE3 in June. One of the reasons I thought QE3 was unlikely in
June was the lack of foreshadowing from the Fed. There have been plenty of
hints since then, so QE3 is very possible this week - but still uncertain.
Economists React: Don’t Expect QE3 This Week – Real
Time Economics / WSJ
Analysts tended to argue that the central bank needs to see two more jobs data releases before reaching a consensus on the need for more stimulus. Many say they see the Fed as much more likely to act at its subsequent policy-setting meeting, scheduled for Sept. 12-13.
Analysts tended to argue that the central bank needs to see two more jobs data releases before reaching a consensus on the need for more stimulus. Many say they see the Fed as much more likely to act at its subsequent policy-setting meeting, scheduled for Sept. 12-13.
Fed May Be in Whatever-it-Takes Mode, But It
May Not Take it This Week – MarketBeat
/ WSJ
If the Fed doesn’t act, if the Wednesday policy statement comes and it doesn’t include a QE3 announcement, the market is sure to get the usual knee-jerk reaction, a sharp sell-off as the bets are unwound with computerized speed and human alacrity. But it won’t take long before traders wrap their heads around the next FOMC meeting, or the August Jackson Hole confab, and start putting the QE3 bets back on.
If the Fed doesn’t act, if the Wednesday policy statement comes and it doesn’t include a QE3 announcement, the market is sure to get the usual knee-jerk reaction, a sharp sell-off as the bets are unwound with computerized speed and human alacrity. But it won’t take long before traders wrap their heads around the next FOMC meeting, or the August Jackson Hole confab, and start putting the QE3 bets back on.
So the markets are not pre-empting the Fed, nor
is the Fed driving the markets: the markets are forcing the Fed to respond to
its liquidity habit. Weaning them away
from this is going to take leaders with great vision and great determination: so
most of us will probably be better off betting on the continuation of the
Greenspan Put.
Charting The Diminishing Multiple Expansion
Benefits Of Fed Action – ZH
As soon as the Fed-sponsored money-supply 'flow' expansion ended, so the P/E multiple-expansion ended (and indeed reversed very quickly).
As soon as the Fed-sponsored money-supply 'flow' expansion ended, so the P/E multiple-expansion ended (and indeed reversed very quickly).
31-JULY
Fed likely to wait until September before
easing more – Danske
Bank (pdf)
Preview FOMC – Marc to Market
The advantage of the September meeting is that
1) the Fed would have another two monthly employment reports and more economic
data in general, 2) it may have greater insight into what European officials
will do, and this could effect a headwind to the US economy that Fed officials
have recognized, and 3) it provide more time to "devise new tools".
FOMC Meeting: 3 possible scenarios, plus 3
policy drivers – Saxo
Bank
Remember that until further notice, this FOMC
meeting will only see the release of a new policy statement. This is not one of
the meetings that includes revisions of Fed economic and policy forecasts nor a
Bernanke press conference (which we will see in September.).
Try overshooting for once – Free
exchange / The Economist
We've experienced sustained periods of very
high inflation, we've experienced disinflationary recessions, and we've
experienced a prolonged period of very high unemployment, and we have a clear
sense of which is the worst of the three. Given the reality of years, perhaps a
decade, of high unemployment, the alternative approach—seeing if a couple of
years of higher demand, consistent with 4% inflation, can help—looks not just
attractive but obviously better.
The Fed’s 2% inflation target trap – Economist’s
Forum / FT
Though not a problem today, this two per cent target represents a policy trap that will undercut the possibility of future wage increases despite on-going productivity growth. That promises to aggravate existing problems of income inequality and demand shortage.
Though not a problem today, this two per cent target represents a policy trap that will undercut the possibility of future wage increases despite on-going productivity growth. That promises to aggravate existing problems of income inequality and demand shortage.
Will Ben Bernanke Pull the Trigger on More Bond
Buying? – TIME
(audio) Kounis Sees No QE3 From Federal Reserve
This Week – BB
(mp3)
The right swap – alphaville
/ FT
Arvind Krishnamurthy and Annette Vissing-Jorgensen have an interesting variation on what the Fed should do next: start buying MBS while selling longer-term Treasuries.
Arvind Krishnamurthy and Annette Vissing-Jorgensen have an interesting variation on what the Fed should do next: start buying MBS while selling longer-term Treasuries.
Twist is Fed's most effective policy tool right
now – Sober
Look
The most probable outcome of the FOMC meeting
currently under way is the continuation of "Operation Twist" and
possibly the extension of the current “exceptionally low… through late 2014”
rate guidance to "mid 2015."
Golman Sachs: FOMC Preview – ZH
Rate extension but no new QE
Like over-hyped Olympian, Fed set to disappoint – MacroScope
/ Reuters
The U.S. central bank may not
want to get out just ahead of the European Central Bank’s policy decision on
Thursday. If, down the line, things get really ugly in Europe – or if the U.S. Congress sends the
country off the so-called fiscal cliff – the Fed will probably want to have the
QE3 bazooka ready in its arsenal.
1-AUGUST
FOMC Preview – PragCap
Likely market reaction – a big dump followed by
a comeback when investors realize the world isn’t going to end just because the
baby didn’t get its pacifier. And if I
am wrong and the bazooka gets triggered tomorrow, well, I’ll see you on the
other side of a 2% rally.
FOMC Preview – PragCap
Likely market reaction – a big dump followed by
a comeback when investors realize the world isn’t going to end just because the
baby didn’t get its pacifier. And if I
am wrong and the bazooka gets triggered tomorrow, well, I’ll see you on the
other side of a 2% rally.
Fed Wraps Up Meeting as Markets Await Action – TIME
Fed to signal more easing but stop short of big
steps – Reuters
The Federal Reserve is likely to show on
Wednesday that it is ready to act against a weakening economy but stop short of
aggressive measures for now.
The Fed will Disappoint but it Won’t Matter – TF MarketAdvisors
STATEMENT
Fed Does Nothing, Says Less and Dollar Advances – Marc to Market
The Fed will Disappoint but it Won’t Matter – TF MarketAdvisors
What Does The Market 'Expect' From The Fed/ECB? – ZH
Citi’s
short updated views
STATEMENT
FOMC will
provide additional accommodation as needed – ASA
The Fed, pacing – alphaville / FT
The Fed, pacing – alphaville / FT
Fed says economy weaker, but leaves policy on
hold – Reuters
The Federal Reserve on Wednesday said economic
recovery had lost momentum so far this year, but stopped short of offering new
monetary stimulus even as it signaled further bond buys could be in store.
Fed Signals More Steps to Spur Economy Amid
Slower Growth – BB
Fed Does Nothing, Says Less and Dollar Advances – Marc to Market
Fed Does Nothing; Stocks Sink – MarketBeat
/ WSJ
Redacted Version of the August 2012 FOMC Statement – Alea
Compares changes in statements
Fed: No help for the economy now, try us again later – Wonkblog / WP
Yields Flatten, FX Market Not Buying Equity
'Hope' Reversion – ZH
Redacted Version of the August 2012 FOMC Statement – Alea
Compares changes in statements
Fed: No help for the economy now, try us again later – Wonkblog / WP
See no evil – Free
exchange / The Economist
You can show the Fed all the unemployed workers
and brewing crises you want. In the end, if you want them to act, you need to
be able to show them evidence that inflation is below 2% and expectations are
falling fast.
FOMC: Goldman's Take – ZH
some form of monetary easing at the September
12-13 FOMC meeting is the current baseline.
The Fed is worried, but leaves policy on hold – CBS
Bernanke says no to the peer pressure – The
Big Picture
The Fed: Nothing – The Daily
Capitalist
Citi Sounds A Warning: "The Misread Of The
Fed May Also Worry Investors That They Have Misread Draghi" – ZH
First Policy Disappointment of the Week – Tim
Duy’s Fed Watch
As for September, it is data dependent. But we need to see some substantially weaker
data. The last six months seems to have
proved beyond a shadow of a doubt that the bar to more QE is much higher than
could be inferred from the public comments of dovish policymakers.
Fed leaves policy unchanged but strengthens its
easing bias – Nordea