MacroScope

More Fed QE: done deal or Pavlovian response?

“Will he or won’t he?” That’s what investors, traders and policy-watchers in the financial markets are pondering, frozen at their terminals waiting to find out if Federal Reserve Chairman Ben Bernanke will persuade his colleagues to print more money this week.

Among economists who work for primary bond dealers, the firms who sell government bonds directly to the Fed, there’s a striking conviction rate that he will, 68 percent, according to the latest Reuters Poll of probabilities.

The wider forecasting community isn’t far behind, at 65 percent.

While that kind of probability is more than enough to make people paid handsomely to take huge bets with other people’s money to confidently say something is a done deal, the real policy decision is probably a lot closer.

Indeed, just a few weeks ago, after Bernanke gave a speech at the Fed’s annual conference in Jackson Hole, Wyoming that failed to give a clear signal for the timing of more QE or indeed whether or not he would print more money, the broad consensus among economists and global asset managers was a mere 45 percent chance it would do so at the meeting this week.

That’s about as split down the middle as these unscientific debates through analyst polls can go.

Banking on a Portuguese bailout?

portgualprotest.jpgReuters polls of economists over the last few weeks have come up with some pretty firm conclusions about both Ireland and Portugal needing a bailout from the European Union.

Portuguese 10-year government bond yields have hovered stubbornly above 7 percent since the Irish bailout announcement, hitting a euro-lifetime high and giving ammunition to those who say Lisbon will be forced into a bailout.

And of those who hold that view, it’s clear that bank economists have been most vocal in expecting Ireland and Portugal to seek outside help.