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US: Fed’s QE4 in the pipeline - Swissquote

FXStreet (Delhi) – Yann Quelenn at Market Analyst at Swissquote, suggests that given the massive debt burden of the US, QE4 is definitely not far-off.

Key Quotes

“According to the IMF Head Christine Lagarde: “We are in a recovery process whose pace is decelerating”. These words underpin the uncertainty facing western countries despite emerging countries being said to be the driving forces of the global recovery. For several years now we have been told that the recovery is in progress through optimist forecasts. Yet, we remain in an era where economic forecasts are constantly revised down.”

“The Federal Reserve has overturned such thought by being afraid of increasing interest rates of a quarter point after seven years so called ZIRP (zero interest-rate policy).”

“The truth is that major countries have astonishing debt, above 100% GDP in the US and around 230% in Japan. Furthermore, this does not include all the off-balance-sheet commitments. These figures may likely be considerably higher.”

“The United States owns $18 trillion debt. A rate hike will increase their annual deficit by $45 billion a year. At this point, there is no more room left for the Federal Reserve to act. QE4 is definitely not far-off.”

“Meanwhile, Lagarde has revised down the IMF global economic growth forecast of 3.3% for this year, which are “no longer realistic”. She added that nevertheless, we will remain above the 3% threshold. Optimism is definitely an IMF virtue.”

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