Photo: Bloomberg TV
A third round of quantitative easing is coming this Wednesday, top Société Générale economist Michala Marcussen says.Marcussen writes that if anything, the boost will help “only at the margins.”
“We have long held the view that each new round of QE comes with diminishing returns,” she says. “We nonetheless see the impact as positive – if nothing else giving the reassurance of a pilot in the plane.“
On how the Federal Reserve will announce and implement QE3:
With economic data signalling stall speed growth for the US, we expect the Fed to lower its current 2012 growth outlook from 2.7%, narrowing the gap to our own forecast of 1.8%. This – and the risks from the euro area debt crisis – will allow the Fed to adopt QE3 at the June 20 FOMC. We estimate the Fed could extend twist by another $150bn, but our expectation is that the Fed will instead allow its balance sheet to expand a further $600bn, with purchases split 40/60% between MBS and Treasuries.