Forex News
September 15, 2012 @ 10:48 am

Economists Expect QEX of $600 Billion But Doubt It Will Lower Unemployment

I wrote about the Federal Reserve latest QE my previous article (click here for more). The short version is that the Central Bank basically said it plans to do unlimited balance sheet expansion by printing money and buying mortgage backed securities (MBS) until the labor market improves. Now we get the first estimates for how much MBS Fed will buy and what may be their unemployment rate target.

A Reuters poll of 52 economists puts the median estimate for the Fed’s newest QE program at 600 Billion dollars. The individual forecasts range from 250 Billion to 2 Trillion dollars. Among the 13 primary dealers that do business directly with the Federal Reserve, the median forecast is for a QE of 750 Billion dollars.

For the unemployment target, the median estimate of 47 economists is 7%. This is the level at which the Central Bank may stop the newest Quantitative Easing program.

On Operation Twist, 49 out of the 58 polled economists expect the Federal Reserve will buy more treasuries even after the operation ends in December. According to Dana Saporta of Credit Suisse, until the labor market improves substantiality both MBS and treasuries purchases are likely to remain operational.

Its very interesting to note that 52 out of the 58 economists polled have not revised their expectations for the unemployment level at the end of 2013 and 2014 even after the Fed’s latest QE. RBC Oubina had this to say: “We continue to believe that monetary policy is ineffective in influencing the fundamental economic backdrop”.

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About Fx_Livermore

Fx_Livermore has over seven years experience in forex trading. He uses a mix of technical and fundamental analysis in his trading. His posts should not be taken as trading advice/recommendation to buy/sell any currency/security.

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