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Fed QE might be needed again - Deutsche Bank

FXStreet (Łódź) - Jim Reid, Head of Global Fundamental Credit Strategy at Deutsche Bank argues that another QE program from the Fed is possible, probably during the next US recession.

Key quotes

"The rationale being that the terminal Fed funds rate will probably not be able to get high enough this cycle for conventional policy alone to be enough by the time we get to the next recession."

"By this time the ECB may be fully into QE and the BoJ may have done more, so without Fed QE the dollar might also be becoming too strong for comfort. However after the events of the last few weeks could the Fed actually re-start purchases before a recession?"

"Well Fed Williams made some interesting comments yesterday, albeit ones that were caveated. He was quoted as saying that 'If we really get a sustained, disinflationary forecast ... then I think moving back to additional asset purchases in a situation like that should be something we should seriously consider'."

"However he did say it would take a big shift in the U.S. economic outlook for the Fed to restart its bond buying and that he still felt it would likely be appropriate to begin lifting rates from zero in the middle of next year."

"So a fairly big bid-offer on how Fed policy might evolve over the next 12 month but another small sign from the Fed that there is some recent anxiousness about global growth and inflation."

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