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21 Feb 2013
Forex Flash: Ben Bernanke still maintains control – Westpac
The Federal Reserve chairman’s semi-annual testimony is always a notable event for markets and Tuesday’s appearance by Mr. Bernanke has taken on increased importance in the wake of the minutes from the FOMC’s 29-30 Jan meeting. Once again we enter the world of semantics as we are forced to compare the views of “several” participants suggesting varying the pace of asset purchases (QE) versus “a number” of others advocating tapering or stopping QE even before the job market had improved substantially.
In addition, we have “several others” who warned against prematurely winding back monetary easing. A number discussed maintaining loose policy longer than previously assumed. Recall that the FOMC chose the most generous option when Operation Twist ran its course in Dec, adding the balance sheet-neutral $45B monthly Treasury purchases of Twist with the same amount but funded by balance sheet expansion (money printing).
“Add this to QE3’s $40bn of MBS purchases and the Fed is buying $85bn per month, a $1 trillion annual pace – even for the Fed that is a very significant amount. We can imagine that tapering purchases was advocated by St. Louis Fed president Bullard, given that he recently delivered a speech devoted to the topic, while the familiar regional hawks will have focused on the side effects of QE and argued for winding it up ahead of schedule.” notes Global Strategist Sean Callow at Westpac.
In addition, we have “several others” who warned against prematurely winding back monetary easing. A number discussed maintaining loose policy longer than previously assumed. Recall that the FOMC chose the most generous option when Operation Twist ran its course in Dec, adding the balance sheet-neutral $45B monthly Treasury purchases of Twist with the same amount but funded by balance sheet expansion (money printing).
“Add this to QE3’s $40bn of MBS purchases and the Fed is buying $85bn per month, a $1 trillion annual pace – even for the Fed that is a very significant amount. We can imagine that tapering purchases was advocated by St. Louis Fed president Bullard, given that he recently delivered a speech devoted to the topic, while the familiar regional hawks will have focused on the side effects of QE and argued for winding it up ahead of schedule.” notes Global Strategist Sean Callow at Westpac.