Chronicle Of QE3 Exit Foretold

Published 06/21/2013, 04:53 AM
  • Volatility is back
  • Long-term yields up
  • Stock exchanges down
Renewed volatility in the financial markets helped focus the attention of the G8 heads of state on the main challenges that must be met to promote long-term world growth. Ben Bernanke was absent but he was on everyone’s mind. In recent weeks, investors have reacted nervously to his statements. The Fed’s president suggested that the central bank could begin to slow the pace of its QE3 monetary easing programme in the near future. In this context, the press conference which followed the FOMC meeting on June 18 and 19 was an occasion for him to clarify his point. Ben Bernanke has never been so explicit about the pace of changing monetary policy in the near future. This change will be closely hinged on macroeconomic data trends.
RISING VOLATILITY

THE WEEK ON THE MARKETS
A QE3 exit is likely as soon as the middle of next year, once the unemployment rate drops to about 7%. The evolution in monetary and financial conditions is also key. Along with the analysis of economic data, the latest will determine whether maintaining the current massive monetar stimulus is still accurate or not.

BY Caroline NEWHOUSE

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