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The quantitative policy hokey cokey

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  • Fed Chairman Bernanke will perform the quantitative policy hokey cokey before the Joint Economic Committee of Congress today (you put 85 billion in, you take 85 billion out). We expect him to emphasise that the reduction of quantitative measures will depend on data.
  • Quantitative policy has not supported risk assets directly (money printed was not used to buy risk assets). It did reduce tail risks (deflation, liquidity crunches) which supported risk. If the Fed reverses quantitative policy when economic risks are falling, there is no automatic negative for risk markets.
  • The Bank of Japan did nothing at the conclusion of its policy meeting (no surprises there). Former World Bank President Zoellick has warned that growth in Japan could just be a "sugar high", and temporary, in the absence of proper structural reform.
  • The UK releases the minutes of the Bank of England's last meeting, and the IMF releases its report on the UK (of minor interest, given the apparent ideological struggles within the IMF over austerity). An European Union leaders' summit starts, which markets will almost certainly ignore for now.

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