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FED CONSIDERING 3 OPTIONS FOR NEXT ROUND OF EASING
Joe Weisenthal | Sep. 7, 2011, 9:08 PM | 2,205 | 18
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The WSJ's ace Fed reporter Jon Hilsenrath says the Fed is considering 3 options for further easing at its two-day meeting September 20-21.
They are:
So called "operation twist." Extending the duration of the Fed's bond portfolio by selling the short-end and buying more long-dated bonds, to push the end of the curve even lower.
Another possibility is to reduce the interest on excess reserves that banks hold with the Fed as a spur to hold fewer reserves and lend more money.
Finally, the Fed might use even clearer language to emphasize that it will hold rates very low for a long time.
Read the full WSJ report here >
Here's The Big Call From Morgan Stanley: There's A Chance of Major Coordinated G7 Intervention As Soon As This Weekend
Joe Weisenthal | Sep. 7, 2011, 3:29 PM | 8,528 | 28
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From the latest Morgan Stanley global monetary analyst, something to watch this weekend:
A fiscal response to economic weakness in the US and the euro area may be desirable but is unavailable, at least in the short run. The burden of propping up markets and the economy for the next few months thus falls on central banks. The negative feedback loop between weak growth and soggy asset markets makes a coordinated monetary policy easing move more likely – perhaps as early as the G7 meeting this weekend. The Fed, the ECB, the BoJ and the BoE could all participate in a coordinated move with a mix of rate cuts and quantitative easing. Strategic complementarity – the willingness and ability to ease if others are doing the same – makes it easier for banks to act jointly rather than unilaterally. Such strategic complementarity also exists for EM central banks. The recent pre- emptive (and perhaps prescient) rate cuts by the central banks of Turkey and Brazil make monetary easing by other EM central banks less surprising and thus that much easier to implement. However, the interaction between DM and EM central banks is one of ‘strategic substitutability’ – aggressive easing by the former means that the latter can afford to do less when it comes to external demand concerns. But if DM central banks don’t deliver, then EM central banks may find themselves following the trail blazed by Turkish and Brazilian monetary easing.