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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: Cogito Ergo Sum who wrote (67181)	10/14/2010 11:52:32 AM
From: elmatador	Read Replies (1) \| Respond to of 219603

Fed will export its problems to its trading partners through debasing the [U.S. dollar], inflating away its debts, and sparking currency appreciation against the [U.S. dollar] fed by strong capital inflows elsewhere," How the Fed’s looming QE2 could hit Canada Michael Babad Posted on Wednesday, October 13, 2010 5:46PM EDT The Federal Reserve is moving ever closer to new measures meant to juice the faltering U.S. recovery. Dubbed QE2 by economists, for quantitative easing, the move could come as early as the U.S. central bank's next meeting. Signals sent Tuesday in minutes of the last meeting of the Fed's policy-setting panel helped fuel equity markets today. "The Sept. 21 minutes of the Federal Open Market Committee (FOMC) meeting reinforced our expectations that the committee will deliver additional quantitative easing at the November 2-3 meeting," said Goldman Sachs Group Inc. economists. "First, the FOMC was clearly disappointed with recent economic activity and inflation, both of which were judged to be unacceptably low relative to the committee’s mandates. The staff lowered its growth forecast for the remainder of 2010 and slightly for 2011 as well. While this forecast anticipated a small absorption of spare capacity by 2012, this was not judged to be enough to prevent a net decline in core inflation between 2010 and 2012. "Second, the minutes hint - though they do not specifically say - that some members would have been ready to adopt additional easing already at the September meeting. " What would another round of measures mean for Canada? The fallout could be not insubstantial. The Canadian dollar is already flirting with parity, driven up, yes, by commodity prices, but also by a weakening greenback. Economist Derek Holt of Scotia Capital believes such a move by the Fed could export troubles in the U.S. to its trading partners. First, the Federal Reserve is now seen not raising its benchmark lending rate until the fourth quarter of next year, meaning the Bank of Canada could also be forced to stand pat for longer than it wants given what it would mean for the spread between the two rates otherwise. "In the process, the Fed will export its problems to its trading partners through debasing the [U.S. dollar], inflating away its debts, and sparking currency appreciation against the [U.S. dollar] fed by strong capital inflows elsewhere," Mr. Holt said in a research note. "Lower rates across the curve in Canada for longer than would otherwise be the case and longer than warranted by non-emergency domestic circumstances could well – in my opinion – further aggravate domestic imbalances evident in a dispassionate reading of a cross-section of variables concerning house prices, household leverage, the home ownership rate, and housing demand variables. I can’t see it as prudent to gloss over the risk that low rates for too long fed partly by foreign monetary policy could well spark rising risks and imbalances in Canada over the fuller cycle when most of these variables are already at record highs."