‘Let markets clear.’ It’ll be just ‘a financial engineering shock.’
Stock and bond markets are in denial about the effects of the Fed’s forthcoming QE unwind, whose kick-off is getting closer by the day, according to the minutes of the Fed’s July meeting.
‘Several participants’ were fretting how financial conditions had eased since the rate hikes began in earnest last December, instead of tightening. ‘Further increases in equity prices, together with continued low longer-term interest rates, had led to an easing of financial conditions,’ they said. So something needs to be done about it.
And ‘several participants were prepared to announce a starting date for the program at the current meeting’ – so the meeting in July – ‘most preferred to defer that decision until an upcoming meeting.’ So the September meeting. And markets are now expecting the QE unwind to be announced in September.
This post was published at Wolf Street on Aug 21, 2017.
Follow on Twitter
Recent Comments