Calls for QE3 have existed since Jon Hilsenrath wrote an article in the WSJ in March detailing the potential for QE3 if employment numbers remained stagnant. Since then, it seems that we have gotten periodic calls for QE3 on any potential weak economic data point. The calls and shouts from the spectators have not translated into QE3 so far this year, but Bernanke’s Jackson Hole speech and the most recent Fed minutes have created a market consensus that this meeting will be THE meeting that vindicates the shouts from the stands.
One look at commodity prices is enough to assume that the market views QE3 odds for today at 75-90%. The dollar’s aggressive selloff tells the same story. What is curious to me is that QE3 at today’s meeting would seem to be quite inauspicious timing from the Fed’s perspective. Why wait until one meeting before a Presidential election, with the stock market at 4 year highs, and economic data seemingly turning back up after another bout of seasonal weakness? Especially when you could have initiated QE3 in June or July with far fewer negative repercussions as an institution? But I’m not Ben Bernanke.
- Quiet session in Asia, with markets trading on very light volume, and most closing within 0.5% of the unchanged mark
- Europe opened close to flat, and has moved lower throughout the morning, down 0.5-1% in most markets. SPX futures down 0.1% in sympathy
- The dollar is close to flat vs. most major crosses, as the Euro has not breached the 1.2950 level, which is unchanged on the year, just yet
- Commodities are close to flat as well, as are Treasury bonds
- FOMC statement release at 12:30 pm, followed by the press conference around 2:00pm