In a poll conducted earlier this week in the CFA Institute Financial NewsBrief, we asked subscribers what they thought would be the most likely impact of QE3.
What do you think will be the most likely impact of QE3?
With the announcement of a third round of quantitative easing, the Federal Reserve will begin buying $40 billion of mortgage-backed securities with newly printed money each month, or $480 billion per year. These transactions translate into an 18% year-over-year increase in the US monetary base.
Importantly, purchases will be made in the secondary market, which circumvents primary dealers, to some degree, so QE3 has an incrementally greater chance of making its way out of the banking sector into the broader economy. As a group, however, 48% of 1,177 professional investors who responded to this poll think that markets will adapt to the Fed's action and stifle QE3's main objectives of improving the job and housing markets. Coming in a close second, 40% of professional investors see the Fed's action as stimulating inflation. Lastly, only 11% think QE3 will produce its intended effect.
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7 Comments
Why was there no choice for 'unintended effect: excessive deflation' ?
Bias.
We're closer to deflation than to big inflation and have been for years. But it's illegal to utter the "D word" if you want financial press cred.
I suspect that, like the overall history of manipulating the market to increase production, it will succeed. You only need to compare the places with governments that engage in such manipulations to those that don't to see the value.
The choice that this poll is really missing is:
"Intended Effect: Excessive Inflation"
So yes, this a bit biased.
effect of QE is very bad on world economy.....going ahead. As it will not the problem of job market. It will cause increase in inflation and collapsing world stock market...
effect of QE is very bad on world economy.....going ahead. As it will not the problem of job market. It will cause increase in inflation and collapseing world stock market...
we are heading to big downturn, QE3, unlimited bond buying and measures as such are just to create an euphoria around the globe that markets/economy would improve, but history has its records, what goes around comes around and this downside would be seen evidently sooner or later so till just go with the flow.