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How Will Ending Quantitative Easing Effect the Markets?
Written by Steven Hansen
The Federal Reserve’s FOMC meeting minutes were released earlier this week indicating many (few, majority, most, all?) members were leaning towards terminating some aspects of the current quantitative easing (QE) purchases sooner rather than later.
….A few participants noted that they already viewed the costs as likely outweighing the benefits and so would like to bring the program to a close relatively soon. A few others saw the risks as increasing fairly quickly with the size of the Federal Reserve’s balance sheet and judged that the pace of purchases would likely need to be reduced before long.
This conjured up images of market volatility, yet the markets reacted positively. So much for the belief that this market run up was on the back of QE, and effectively disproving a withdrawal of QE is necessarily market negative. The following graph points the the low correlation between market prices and QE.
2013-04-12 22:31:33
Source:
