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In a note on Tuesday, Alan Ruskin, a strategist at Deutsche Bank, said there were “at least eight good reasons that will encourage the Fed to keep the QE3 debate behind closed doors for the moment”. These include – in Mr Ruskin’s view – the fact that the “extent of the slowdown is poorly understood”, as well as the need for the US central bank to “store ammunition” in case fiscal consolidation hurts growth in the coming years. Also a factor could be the negative reaction to QE2 from domestic political opponents and international critics concerned that the US is devaluing the dollar.
“It is easy to see how the presumption that the bar is set high for the Fed to enact QE3 seems perfectly reasonable, despite the perception that the economy is setting up in a very similar fashion to [last year], with a rising threat of a double dip into the late summer,” Mr Ruskin said.
