U.S. Economy Have Taken a Small Step Quantitative Easing is a Foregone Conclusion

U.S. Department of Commerce on Friday said third-quarter U.S. gross domestic product growth of 2.0%, and the market had expected. However, despite the pace of U.S. economic growth in the third quarter than the second quarter, accelerating slightly, still not enough to stimulate employment increased significantly.

Data showed U.S. third-quarter real GDP growth of initial annualized rate of 2.0% in quarter, second quarter growth of 1.7%. Initial value of final sales in the third quarter on quarter rate of 0.6%, is expected to rise 1.2%; the third quarter, consumer spending increased initial rate of 2.6% of the quarter for Q4 2006, the biggest gain since; the third quarter, business investment Years initial rate increased by 9.7% quarter.

U.S. third quarter GDP deflator increased by 2.2% initial, expected to rise 1.9%.

In addition, U.S. imports rose 17.4% in Q3; exports rose 5.0%.

Meanwhile, the U.S. third-quarter personal consumption expenditures price index increased initial rate of 1.0% of the quarter, is expected to rise 1.2%; the core personal consumption expenditure price index increased initial rate of 0.8% of the quarter, is expected to rise 1.1%; to market based personal consumption expenditures price index increased initial annualized rate of 1.3% in quarter; to market-based core personal consumption expenditure price index increased initial annualized rate of 1.1% in quarter; the third quarter personal consumption expenditures price index annual rate of increase in initial 1.4%; the third quarter, the core personal consumption expenditure price index rose by 1.3% initial annual rate.

And the other a separate report, the U.S. third-quarter rate of labor cost index increased by 0.4% quarter is expected to rise 0.5%.

The U.S. third-quarter GDP data and as expected, the rapid decline in the dollar index.

From the general situation, the U.S. GDP data will have a significant impact on the market, but this is different. Before the release of the data, many organizations that, given the Federal Reserve is already a fait accompli quantitative easing, the U.S. GDP data is good or bad will not change the quantitative easing Fed decision, so the data on the currency of materials is limited.

Citigroup said third-quarter U.S. GDP growth if the value is between 2.5% -4.0%, and the data pushed the United States refers to a high point on Wednesday is unlikely, and if the data range between 0.5% -1.5%, is unlikely to suppress the United States refers to a new low.

Commerzbank also said that investors do not expect third-quarter U.S. GDP data will be a significant impact on confidence in the dollar, unless the data indeed surprise the market.

The bank pointed out that regardless of U.S. GDP growth is high or low, the Fed quantitative easing has been a fait accompli.

Unsatisfactory because of the economic recovery, the market is widely expected the Fed next week will start the second round of quantitative easing measures, but the Fed buying bonds around the scale and speed, there is still great uncertainty.

Fed officials for weeks by the outpouring of policy preferences is quite different, some members urged the introduction of a very aggressive stimulus measures, while others maintain a high degree of further easing doubts. This makes it more difficult to try to figure out the outside world within the Federal Reserve will eventually reach a consensus on what, but most analysts believe Fed Chairman Ben Bernanke’s strong tendency will prevail.

Fed is expected to focus on the current market may be divided into 5-month initial commitment of at least 500 billion U.S. dollars to buy treasury bonds to stimulate the credit and support economic recovery, but it is possible for the various policies a number of different versions are given:

“Five months inject 500 billion U.S. dollars, suggesting greater future initiatives”: This is the most common financial market speculation results, and some investors may be expected higher. However, if the purchase amount is less than expected, as long as the Federal Reserve agreed to when conditions permit, may be further action, the market can make up for disappointment. This interpretation of the outside world or the ability to protect the Federal Reserve will do the recovery to encourage U.S. stocks and Treasury prices rose, the dollar will undoubtedly be hit.

“Injection of 750 billion to 1 trillion U.S. dollars, while suggesting that more initiatives coming”: the lag for the consideration of policy, Bernanke has been more under the jurisdiction of the Federal Reserve showed “rather indiscriminate not missing,” the generous tendencies, and fight against inflation than deflation to come easy. The introduction of the Federal Reserve or select larger than market expectations of policy measures to create additional “Zhaogao world” effect. If so, stocks and bonds and other risky assets in emerging markets might soar. Or commodities also rose sharply, investors worried about possible disorderly dollar decline.

“Open the scale of quantitative easing, and do not first make the commitment of funds”: Given the hawkish FOMC officials of the internal opposition, the Fed may be difficult for large initial capital commitment. Federal Reserve announced a month or buy securities worth about 100 billion U.S. dollars, also hinted that economic development will take more measures. In the international community for the actions of quantitative easing in the context of dissatisfaction with the way may be able to play an additional role to quell the doubts.

“Quantitative easing scale 5000-700000000000 U.S. dollars, not the future as a reminder to”: to limit the overall size of the future may be the best way to convince skeptics. Federal Reserve banking system is currently open line of credit of 2.3 trillion dollars, has reached three times the pre-crisis levels. Some officials worry that the balance sheet to expand the circumstances, the Fed eventually will become increasingly difficult to withdraw from the ultra-loose policy. But this is hard to imagine the Fed will adopt a non-traditional policy, do not give yourself a follow-up to stimulate sustained economic recovery in the space.

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