The City of London’s financial market gurus threw their toys out of the pram again this
morning, following the US Federal Reserve’s decision last night not to launch more quantitative easing. The stock markets have slumped as a result.
Why aren’t they happy? Even Bank of England research admits that QE gives the stock market a temporary lift (very good for year-end bonuses) at the cost of higher inflation.. That’s why traders want it, but central banks like the Fed and the Bank of England are reluctant.
But it looks like conservatives are now succeeding in preventing more QE in the US. The US Congress Republican leadership yesterday issued a joint statement calling on the Federal Reserve to “resist further extraordinary intervention in the U.S. economy”. And Jeffrey Lacker, one of the leading hawks on the Fed, told the FT:
My sense is that more monetary stimulus at this point would likely show up almost entirely in higher inflation with very little constructive influence on growth.”
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