QE3

No Quantitative Easing For You

money gamblingSorry speculative traders in commodities, the Fed actually did a just say no on more quantitative easing. The FOMC meeting minutes for January 24-25th were released last week and some speculative commodities traders still seem to be in denial land.

The FOMC money quote:

The Committee also stated that it is prepared to adjust the size and composition of its securities holdings as appropriate to promote a stronger economic recovery in a context of price stability. A few members observed that, in their judgment, current and prospective economic conditions--including elevated unemployment and inflation at or below the Committee's objective--could warrant the initiation of additional securities purchases before long. Other members indicated that such policy action could become necessary if the economy lost momentum or if inflation seemed likely to remain below its mandate-consistent rate of 2 percent over the medium run. In contrast, one member judged that maintaining the current degree of policy accommodation beyond the near term would likely be inappropriate; that member anticipated that a preemptive tightening of monetary policy would be necessary before the end of 2014 to keep inflation close to 2 percent.

Here Come Commodities on Fire - Thank You Federal Reserve

tin man blows topQuantitative Easing rumors are now spreading like wildfire. Speculators have already grabbed one commodity, tin.

Tin climbed the most in almost four months in London as prospects of low U.S. interest rates at least until 2014 boosted speculation of increased demand for the metal used in mobile phones, plasma screens and cars.

Gold bugs are also going nuts and most commodities have jumped in prices, almost overnight.

There was a one two three punch by the Federal Reserve. First the FOMC announced uber-low interest rates until 2014.

The Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.

Bernanke Jackson Hole Speech Kicks the Can Over to Obama and Congress

bernake say whatFederal Reserve Chair Ben Bernanke gave his long awaited Jackson Hole speech this morning. Now all are reading between the lines on whether more quantitative easing will be done and picking apart every single word as if Bernanke speaks in cryptography.

 

First, here is the speech paragraph that will generate quantitative easing, or QE3 buzz:

In addition to refining our forward guidance, the Federal Reserve has a range of tools that could be used to provide additional monetary stimulus. We discussed the relative merits and costs of such tools at our August meeting. We will continue to consider those and other pertinent issues, including of course economic and financial developments, at our meeting in September, which has been scheduled for two days (the 20th and the 21st) instead of one to allow a fuller discussion. The Committee will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools as appropriate to promote a stronger economic recovery in a context of price stability.

Clearly QE3 is still on the table from this speech.

It's All Good - Just Don't Eat, Heat Your Home, or Buy Clothing

By Numerian

If the US can’t constrain its own central bank from ruining the nation and the global economy, it will be up to the financial markets to punish the US in order to put a stop to the madness.

comindex_1.png

By definition, an unhealthy financial market is one in which prices move daily in one direction only, for an extended period of time. Markets without corrections, without the give and take of investors having different opinions about the future, are prone to sudden shocks. This is precisely the situation that has afflicted US stock markets since last July, when investors began to entertain the unanimous opinion that the stock market can only go up because the Federal Reserve will never allow it to correct. And why shouldn’t they think this way, when Fed Chairman Ben Bernanke keeps repeating that a rising stock market with low volatility is a monetary objective of the central bank? He said so again yesterday during his speech and follow-up press conference at the National Press Club:

... the Federal Reserve's securities purchases have been effective at easing financial conditions...equity prices have risen significantly, volatility in the equity market has fallen, corporate bond spreads have narrowed, and inflation compensation as measured in the market for inflation-indexed securities has risen from low to more normal levels...

Pages