5:35 AM | 
Posted by
Free Game Zone |
. The Fed chairman did not announce third round of QE, but reiterated the "range of tools" available to the Fed
. Growth in the U.S. unexpectedly downgraded to 1% annual rate of 1.3% in second quarter
. UK GDP growth unrevised at 0.2% quarterly growth
Good morning. The markets are on tenterhooks ahead of Ben Bernanke 's highly anticipated keynote address at the annual meeting of the Central Bank symposium in Jackson Hole, Wyoming in a Mountain Resort. A year ago, he fired the starting gun for another round of quantitative easing, called the QE2 to boost the U.S. economy on the forum.
While there are still hopes he might reveal more economic stimulus this time the expectations have been scaled back in recent days with high inflation. Those who will probably be disappointed by how QE3 dramatic action, but Bernanke could be some gradual steps to give to revive the flagging economy known.
Over in Amsterdam, nationalised Dutch lender ABN Amro has become the latest bank to cut thousands of jobs. It will slash another 2,350 jobs in coming years in an effort to bring costs down as it prepares for privatisation. This comes after 3,500 job losses at Swiss banking giant UBS earlier this week. ABN Amro, the Netherland's third-largest bank by assets, returned to a profit in the first half.
Always remember that the Jackson Hole speech is not a policy setting speech, and at best can be a useful channel for Fed mood ahead of a meeting of the FOMC serve. But just weeks after one of the riven with dissent in the history of FOMC meetings, this seems highly unlikely. However, Bernanke could repeat some of the ways that the Fed noted that they \ do "what is necessary" to ensure the smooth functioning of markets and a return to growth of the economy.
Option 1 : Hinting at more QE. Rather unlikely, at least not as long as inflation begins to emerge, as it is safe to energy prices in full retreat. But an actual change in policy would be unlikely until November at the earliest. Further economic weakness and fragility of the market would be required.
Option 2: The "Twist":Actually, what is a "twist" operation is called anything like. This involved trying to push up short-term interest rates, while long-term interest rates to bring down, while the Fed would take this opportunity to just try to minimize long-term interest rates. The Fed 's Bullard has determined that such a policy would not ve very effective.
Option 3:Specify targets for increased cycle times - say, for example, that they keep the 10Y Treasury yield of 2% for 12 months. Achieving this might involve additional QE however, so improbable, for the same reasons.
Specify a price level target - this might require inflation to rise above the normal levels associated with price stability for a short period in order to achieve the target. However, it would be more useful as a tool to combat deflation - which doesn't exist in the US. Moreover, how to achieve the target? More QE.? Same problems as option 1.
Provide explicit guidance about the continuation of short term policy accommodation. This is already being used. It didn't seem too effective when the Bank of Canada tried it though. Moreover, when push comes to shove, such commitments are contingent on conditions, and can be broken, as the BoC commitment was.
With hurricane Irene closing in on the American east coast, who's going to pack a bigger punch - Ben or Irene?
Irene weakened slightly today, dropping down to a category 2 storm with maximum sustained winds near 110 mph (175 kph). But some re-strengthening was possible and the storm was expected to be near the threshold between a category 2 and 3 storm as it reached North Carolina's coast, said the National Hurricane Center, according to AP.
Revised U.S. GDP figures for the April-June period, due at 1.30 BST. Economists have for us on a downward correction annualized 1.1% growth in the second quarter of the original 1.3% growth.
"Wouldn 't it be funny ...
... If we get a large upward revision to GDP this morning before Bernanke? "
writes Jamie Coleman @ForexLive on his blog. He goes on to say:
The Bernanke speech will be eagerly awaited, but the expectations have been lowered QE3 evidence of the whole week. Most expect a repeat of Bernanke 's Humphrey-Hawkins testimony in July, where he presented several alternatives to buying more binding:
There might be an outside chance of option 5 - cutting the rate for excess reserves. A lot of QEs 1 and 2 is still sitting in reserve accounts, and getting it moving would be a good idea. I like the idea of a negative rate - can anybody elucidate what the "technical difficulties" Rob mentions might be?
U.S. exports were not nearly as strong as previously thought - it grew by 3.1% instead of 6% pace in the second quarter.
Here are some of the immediate reaction to the U.S. growth figures, courtesy of Reuters.
William Larkin, portfolio manager at Cabot Money Management in Salem, Massachusetts:
GDP in the gray zone. It was ugly, but not a disaster. Would it be less than 1% we have 'd rather have a psychological reaction, but it was expected to move close to the market ahead of Bernanke. It 's in the neutral zone. Now the attention turns to Jackson Hole is.
Paul Vigna @paulvigna, host of WSJ.com's Markets Hub, and writer and editor of Dow Jones Market Talk, has tweeted:
I have an advance copy of Bernanke's Jackson Hole speech, and I can tell you the markets are going to be disappointed.
Of course, it's possibly I'm looking at the wrong speech. I've got a lot of papers on my desk, now that I think of it.
Julia
8, 0, 0
Here 'sa wordle Bernanke' s speech. The most frequently used words are financial, economic, Recovery and Growth Pact.
Finally, and perhaps most difficult, the country would be well served by a better process for making financial decisions. The negotiations, which took over the summer disrupted financial markets and perhaps the economy might be good, and similar events in the future to maintain over time, seriously jeopardize the willingness of investors around the world to U.S. financial assets or make direct investments in job-creating U.S. businesses. Although details need to be negotiated, the fiscal policy could define the ways to develop a more efficient process, with clear and transparent budgets, set goals, along with budget mechanisms to ensure the credibility of the targets. Of course, formally substitute budget targets and mechanisms of the need for fiscal policies to the tough decisions needed to bring the country 's fiscal house in order, which means that public understanding and support for the objectives of fiscal policy means are provided make are crucial.
Economic policymakers face a range of difficult decisions, relating to both the short-run and long-run challenges we face. I have no doubt, however, that those challenges can be met, and that the fundamental strengths of our economy will ultimately reassert themselves. The Federal Reserve will certainly do all that it can to help restore high rates of growth and employment in a context of price stability.
These are the last two paragraphs of BB 's speech. Now you have Obama.
The markets have almost recovered despite Bernanke not announcing a fresh wave of QE. The FTSE 100 is now down just 0.2% to 5,120 points. The Dow Jones is off just 0.02% to 11,150 points.
Simon Goodley
The FTSE 100 has finished down a massive
That's it from us for today, see you again next time Rupert.
0 comments:
Post a Comment