FED, Took No Decision Today

Ben Bernanke had a very clean speech, emphasizing all the possible scenarios and the correspondent solutions. He didn’t said that the QE3 is going to be ended at a certain point for sure but neither he said that QE3 will continue for an undetermined period. The key factors of this equation are the signals of the American economy, especially the labor market and inflation. Lately, the U.S. enjoyed positive results and the rising star that lead to such positive news is the housing market.

As for the rest of the year, “a highly accommodative monetary policy will remain appropriate for the foreseeable future”. At a certain point, trying to soften the effects of its last speaking, Ben Bernanke gave the impression that the indulgent measures are of need so the QE3 program and the “forward guidance” represent the main 2 tools which need important reasons before being removed (key levels are expected in the labor market <<6.5%>> and inflation <<near the 2% target>>).

In order to properly end his speaking, Ben Bernanke wanted to notify the investors that “the Committee would be prepared to employ all of its tools, including an increase in the pace of purchases for a time, to promote a return to maximum employment in a context of price stability.”

If we are to compare the pro QE3 attitude of Ben Bernanke today and the contra QE3 ideas that Esther George transmitted yesterday ,as a representant of half of the FOMC members, which would be the most probable scenario? We should wait the tomorrow’s report where the chairman of Fed is expected to take a more clear position.

Europe Is Still Struggling

In his speech today, Mario Draghi maintained the structure of his last talk. Constrained by the obvious reality, he had to admit the lent pace of recovery and the long list of problems that are not yet solved, as the weak conditions in the labour market and the economic slowdown. On the other hand, the accommodative position of the monetary policy together with the improvements made since mid-2012 and the banking union system should keep the stability of the euro zone.

The heart of Euro zone, Germany, is pumping the same weak and negative sentiment about the current economic situation, announcing a contraction of -0.1% in the industrial production as well as a decreasing trade balance (14.1B). It is difficult to expect positive results in an environment dominated by instability and lack of trust in the Government’s institutions. On the long term, we may be witnessing of improved conditions if the pace of restructuring is maintained.