Nomura Securities Policy Watch: More Easing?...Not An Easy Call
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Nomura Securities Policy Watch: More Easing?...Not An Easy Call
Analyst, Lewis Alexander, said, "While we do not expect the FOMC to implement new policies in June, we highlight alternatives and discuss market implications. We expect that the FOMC will highlight risks to the outlook coming from Europe in its policy statement, and its willingness to ease policy further, if needed. We also expect that Chairman Bernanke will do the same in his press conference."
The mixed bag presents the FOMC with a unique set of challenges, because they have to decide if Greece's more favorable election outcome mutes the U.S. economic slowdown.
Some scenarios from Alexander include:
1. Wait-and-see: No new policy initiative now, but a strong indication that the FOMC could go at anytime if the situation deteriorates (This choice would be an indication that the FOMC is on alert for further threats to the economy)
2. Twist of least resistance: A small (less than $200 billion) extension of Operation Twist (This is probably the easiest policy option for the FOMC to adopt)
3. Bold new policy: Large new QE program or a significant extension of “Operation Twist” ($500bn+) (This would be a pro-active choice for the FOMC)
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Analyst, Lewis Alexander, said, "While we do not expect the FOMC to implement new policies in June, we highlight alternatives and discuss market implications. We expect that the FOMC will highlight risks to the outlook coming from Europe in its policy statement, and its willingness to ease policy further, if needed. We also expect that Chairman Bernanke will do the same in his press conference."
The mixed bag presents the FOMC with a unique set of challenges, because they have to decide if Greece's more favorable election outcome mutes the U.S. economic slowdown.
Some scenarios from Alexander include:
1. Wait-and-see: No new policy initiative now, but a strong indication that the FOMC could go at anytime if the situation deteriorates (This choice would be an indication that the FOMC is on alert for further threats to the economy)
2. Twist of least resistance: A small (less than $200 billion) extension of Operation Twist (This is probably the easiest policy option for the FOMC to adopt)
3. Bold new policy: Large new QE program or a significant extension of “Operation Twist” ($500bn+) (This would be a pro-active choice for the FOMC)
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Ben S. Bernanke, Federal Open Market Committee, Nomura
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