The Fed's policy of "exit" to become one of the topics of greatest concern in the recent market. Not long ago, the Fed's last meeting on interest rates should not only documents show that more decision-makers of the Fed's policy-making body - the Federal Open Market Committee began the current ultra-loose monetary policy, worried about the side effects, and that may be required in the job market significantly reduce or stop the recovery of the debt purchase plan. Fed Chairman Ben Bernanke quantitative easing (QE) policy defense in last week's congressional hearings, but still difficult to quell the speculation of the outside world.
UBS analyst pointed out that the latest report released inside the Fed further escalation of the debate on QE, the Although QE controversies may eventually will lead the Fed to slightly reduce the scale of the asset purchase before the end of the year, but the internal position difficult to unify policy inertia , could mean years in the U.S. monetary policy is in fact difficult to substantial adjustments. UBS also pointed out that there should not be too much to exaggerate the negative impact on the U.S. economy of the United States automatically cut public spending program started on March 1.
Fed internal QE polemic upgrade
The Federal Reserve recently announced 29 to 30 January FOMC meeting minutes show that, compared with last December's meeting, Fed officials on the economic outlook will remain basically unchanged or slightly improved the (modestly improved). The vast majority of officials judge to reduce the downside risks facing the economy. On one hand, the easing of the global financial market, "financial cliff" to partially circumvent; Second, in support of the extremely loose monetary policy, the U.S. real estate sector is a strong recovery, the unemployment rate will continue to gradually decline. Especially in real estate, last week introduced a series of data, and accelerate the recovery of the U.S. housing market. U.S. new home sales soared by 15.6 percent in January of this year, to a high of more than four years, the largest monthly rise and the highest in 20 years; 20 cities in the United States in December last year, house prices rose by 6.8% to record more than six years maximum gains.
UBS noted that the Fed's meeting minutes show that "the vast majority of (most)" officials confirmed the positive effect of the Fed's asset purchase program to ease financial conditions to support the real estate and durable goods consumption, improving the outlook for the job market. However, many (many) "officials of the potential costs and risks of further asset purchase program expressed concern.
But some other officials pointed out that there will be some countervailing factors, a decision-making officials pointed out that this will not necessarily affect Fed policy operations; "Some (a few)" officials fear that further asset purchases may affect the normal operation of the particular financial markets. However, several other (a couple) officials pointed out that this evidence is not clear so far.
UBS analyst pointed out that, from the wording of view, inside the Fed QE exit the controversy, compared to December last year, further warming. Compared with the detailed minutes of the Fed's December 11, 2012 meeting, the officials argue QE pros and cons "Some (a number)," Some (various) "increased" many (many) ", and officials concerns more specific discussion of more refined. Further that the officials for Fed QE pace and time frame of the discussion more clear and direct.
Which several (several) "officials of the clearly presented, based on the assessment of the economic situation and outlook of the change and the pros and cons of asset purchases, the Fed should be prepared to adjust the pace of asset purchases.
"Some (a number) officials directly pointed out: the ongoing evaluation of the pros and cons of the assets purchased and the risks may cause the Fed on the slowing down before a significant improvement in the outlook for the job market, and even the end of the asset purchase program.
Of course, there are "some (a few) and officials from the perspective of historical experience, pointed out that the policy of premature exit may give a negative impact on economic growth, employment and price stability.
Short-term policy of large steering is unlikely
From another perspective, UBS economists said, the Fed earlier exit the QE market expectations, margin is expected to guide foreign capital from emerging markets back to the U.S. and developed economies. However, the exit extremely accommodative policy itself should be confirmed that the momentum of the recovery of the U.S. real economy is better, which means that the emerging markets, including China, export prospects.
Overall, UBS still think the U.S. central bank dramatically reverse the policy direction in the short term is unlikely.
First, according to UBS, the FOMC hawks, neutral, doves vote, the number of officials this year, showing a 1:5:6 structure, means to maintain QE stand there is still a very solid foundation, it is difficult to easily shake. The FOMC voting officials, only George immediately stop QE, stand neutral Brad, the Fed should be slowing down the pace of asset purchases; the same stance neutral Stern recently joined the camp questioned QE. Stance neutral officials to secure, but the hawkish camp questioned QE officials hold voting rights this year is still not enough, Prosser and Fisher, for example, this year the FOMC are no voting rights. The FOMC Committee as a whole and the FOMC voting officials stand tendencies difference means the Fed this year, or difficult to implement significant policy shift.
There is an important point, as one of the core members of the Fed, Ben Bernanke still resolutely support the ongoing QE, this policy may become largely weathervane.
Second, the implementation of monetary policy, there is inertia. The change of policy is always much more difficult than the continuation of policies, but also easier to market impact and volatility. The previous policy actions and comments FOMC dovish camp tend to tighten up policies "to reduce the size of the asset purchase" regarded as "directly" instead of "loose weakened", which means that even if buy less scale. " so that a more moderate pace of adjustment will lead to large concerns in the dovish camp.
UBS analysts say, in the context of division of opinion, the Fed FOMC may follow the path of least resistance in physics, it is difficult to be tilted to any party. UBS American macro team believes that the Fed's internal balance sheet expansion growing concerns may eventually promote its slightly reduce the scale of the asset purchase before the end of this year, but the above factors mean that, to make this decision still needs time. Fed internal controversy is expected to continue to heat up, but the Fed really take a series of substantive measures to exit QE have to wait until at least 2014.
Automatically cut public spending impact should not be exaggerated
Like Bernanke said in congressional testimony last week, the current Fed is more worried about the financial considerations. On March 1, the United States ushered in the large-scale automatic cut public spending. In this regard, UBS believes that there should not be exaggerated the negative impact of this event.
UBS pointed out, even automatically cut public spending to start the actual impact does not imagine as disastrous. From the current situation, the U.S. consumer confidence in the performance is much better than the 2011 debt ceiling impasse in the negotiations, the enterprise level, confidence has improved.
UBS said that the line on the U.S. economy in 2013, an increase of 2.3%, 2014 growth forecast of 3%, in fact, have been taken into account automatically cut public spending half. Expected 2013 automatic cut public spending will be a drag on U.S. economic growth of 0.4 to 0.5 percent, dragged down growth by 0.8 to 0.9 percentage points in 2014. UBS is still expected in the coming months, the White House and Congress will eventually reach a long overdue compromise agreement in order to effectively reduce the short-term impact of the automatic spending cuts.
Even in the case of automatic cut public spending take place entirely, UBS believes that the negative impact should not be exaggerated. First, UBS said investors should distinguish between "authorized" and "Allocation. Actual funding to lag behind budget authorization, fiscal year 2013, the actual expenditure incurred to downsize, will only "budget authority (budget authority) about half of the $ 85 billion under.
In addition, from the current situation, the U.S. consumer confidence in the performance of the overall sound, did not show a sharp decline in the U.S. debt ceiling impasse in the negotiations in 2011, the enterprise level of confidence has improved. These are expected to be partially offset by the negative impact of massive spending cuts bring.
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