No Quantitative Easing For You

money gamblingSorry speculative traders in commodities, the Fed actually did a just say no on more quantitative easing. The FOMC meeting minutes for January 24-25th were released last week and some speculative commodities traders still seem to be in denial land.

The FOMC money quote:

The Committee also stated that it is prepared to adjust the size and composition of its securities holdings as appropriate to promote a stronger economic recovery in a context of price stability. A few members observed that, in their judgment, current and prospective economic conditions--including elevated unemployment and inflation at or below the Committee's objective--could warrant the initiation of additional securities purchases before long. Other members indicated that such policy action could become necessary if the economy lost momentum or if inflation seemed likely to remain below its mandate-consistent rate of 2 percent over the medium run. In contrast, one member judged that maintaining the current degree of policy accommodation beyond the near term would likely be inappropriate; that member anticipated that a preemptive tightening of monetary policy would be necessary before the end of 2014 to keep inflation close to 2 percent.

Translation: The FOMC as a whole cannot justify more quantitative easing under these economic indicators. Sorry speculators, you're SOL. Friday's core CPI of 0.2% for January, 2.3% for the year, sealed your fate. If you don't believe the inflation numbers, consider Dallas Fed President Richard Fisher said QE3 is a market fantasy.

Now commodities traders and speculators are turning to China for their quantitative easing feeding frenzy. China just lowered their central bank reserve requirements:

China's Saturday announcement that it would cut the amount of cash banks need to park with the central bank in a bid to boost lending, joining global counterparts in stimulating economic growth.

The 50-basis point cut, which will free up between 350-400 billion yuan ($55.6-$63.5 billion) in additional liquidity, was the second reduction in Chinese banks' reserve requirement ratio (RRR) since November and takes effect on Feb. 24.

If China isn't enough, the quantitative easing dream is also moving onto Iran. A symbolic move, Iran halts oil imports to the U.K. and France:

Iran’s government on Sunday ordered a halt to oil exports to Britain and France, in what may be only an initial response to the European Union’s decision to cut off Iranian oil imports and freeze central bank assets beginning in July.

Britain and France depend little on Iranian oil, however, so their targeting may be a mostly symbolic act, a function of the strong positions the two nations have taken in trying to halt Iranian nuclear enrichment and to bring pressure to bear on Syria, one of Iran’s closest allies.

Oil immediately surged to $105 a barrel upon the news. Cooper seems to be back on the rise in spite of projected weaker demand for these raw materials, due to the never ending European economic malaise.

Another factor keeping commodities rising is the never ending faith Greece will enact more austerity and thus get their 30 pieces of silver called Bail Out II.

What does the Fed think of European austerity?

U.S. exports was likely to be held back in the coming year by slower global economic growth. In particular, fiscal austerity programs in Europe and stresses in the European banking system seemed likely to restrain economic growth there.

In other words, weaker demand for commodities, metals and oil are what austerity brings.

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Comments

Gold drops like a stone on Bernanke, again, no QE3

Traders are mindless numbnuts it seems. It's so clear there will not be QE3 yet people insisted this would happen. Now Bernanke's testimony today makes a few more wake up.

Gas is going through the roof, there is no way they are going to do more quantitative easing right now.

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