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31 Oct 2013
Flash: Arguments for not tapering - Societe Generale
FXstreet.com (London) - Kit Juckes, Global Head of Currency Strategy at Societe Generale suggested two arguments for not ‘tapering'.
Key Quotes:
“The first is that US growth has slowed and the FOMC wants to see more data before slowing the pace at which it injects money into the bond market. And if growth doesn't pick up, they won't taper. That surely rules out anything this year and suggests March is the earliest the Fed could have the necessary information to justify a move. The parallel which comes to mind is 1998/1999, when the Fed eased after LTCM went bust and Russia defaulted; US data recovered faster than most economists expected (OK, faster than I expected), but the Fed didn't reverse the rate cut until June 1999”.
“The second argument is that inflation is falling. We saw downside surprises to CPI in the US yesterday (core at 1.7%, headline at 2%) and across Europe. The Euro Area figure is out this morning and a combination of lower inflation (0.9%) and higher unemployment (12.1%) ought to make the ECB stop and think for a bit. The US data will be used by some as a reason to delay tapering”.
Key Quotes:
“The first is that US growth has slowed and the FOMC wants to see more data before slowing the pace at which it injects money into the bond market. And if growth doesn't pick up, they won't taper. That surely rules out anything this year and suggests March is the earliest the Fed could have the necessary information to justify a move. The parallel which comes to mind is 1998/1999, when the Fed eased after LTCM went bust and Russia defaulted; US data recovered faster than most economists expected (OK, faster than I expected), but the Fed didn't reverse the rate cut until June 1999”.
“The second argument is that inflation is falling. We saw downside surprises to CPI in the US yesterday (core at 1.7%, headline at 2%) and across Europe. The Euro Area figure is out this morning and a combination of lower inflation (0.9%) and higher unemployment (12.1%) ought to make the ECB stop and think for a bit. The US data will be used by some as a reason to delay tapering”.