Vincent Reinhart, Morgan Stanley’s chief U.S. economist, thinks there’s an 80 per cent chance that a new quantitative easing program is announced at the June 19-20 FOMC meeting.
“Slower employment growth, worsening strains in European markets, and a gloomier assessment of US politicians’ ability to steer clear of the impending fiscal cliff makes it likely that the Fed will mark down its already tepid forecast,” he wrote in a note to clients yesterday.
Here’s what he thinks it’ll look like:
As our base case, we assume the Fed would purchase $525 billion in 10-year duration equivalents, $475 billion in par amount. We expect the program to last nine months and remove $53 billion par amount of securities from the market each month – in line with previous programs.
Photo: Morgan Stanley