When will QE be reduced the US?

By 15/04/2021News

Gold  1741,515

EURUSD   1,1972

DJIA  33691,50

OIL.WTI  62,995

DAX   15191

No sooner have the passions over the minutes of the US Open Market Committee meeting passed than its representatives make some very interesting new statements which shed light on further QE plans.



St Louis Fed President James Bullard said that vaccination of 75% of the US population would be a signal that the COVID-19 crisis is coming to an end and it would be a prerequisite for the Central Bank to start considering a reduction in the bond-buying programme and therefore a gradual winding down of the quantitative stimulus programme.
In the USA around 36% of Americans have now received the first dose of vaccine and 22% have already been fully vaccinated. The US government is trying every way to speed up vaccination and with a little forecasting, the 75% level could be reached as soon as this summer, in 2-3 months.
So we can expect some first signals from the Fed to slow down the printing press as soon as this summer. Of course there is still plenty of time and many factors that could change this view, but at least we now know the point where we need to start watching the Fed and their statements.
Let’s now speculate how the Fed will put the brakes on the printing press. From past experience, they will most likely start reducing their purchases of Treasuries by $10 billion each month. Whether they will be able to shut down the printing presses completely is unclear, because the national debt is already over 100% of GDP. Debt service is getting more and more difficult and now the USA can get into a financial trap when it will be impossible to service the national debt without printing money.
The conclusion is that the Fed will stay the course until the end of summer. It is unlikely that there will be any strong bearish movements in the markets. The economy is pumped with money and the markets absorb it. Next, we need to look closely at what will happen with vaccinations and the number of people getting sick. After all, there are no concrete statistics yet on whether and how vaccinated people will get sick.

08.00 Harmonised consumer price index in Germany YTD
14.00 US retail sales for March

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.