Investors beginning to consider QE3 possibility

by Jack Bibey | Sunday, Apr 15, 2012 | 339 views

Optimism in the future of the United States economy fueled doubt that there would be a third round of quantitative easing; however, doubt over the government’s intervention has begun to fade. This is due to the recent releases of less than encouraging reports on the health and progress of the economy.

Around 45 percent of respondents to the Citigroup survey stated that they did not expect the government to initiate a third round of QE (quantitative easing) during April. This is down  from nearly 60 percent in March. The Fed’s replacement of $400 billion in short term maturities with longer-term debt  is known as Operation Twist and will end in June.

The data has been a bit softer, especially the recent payrolls number,” said Neela Gollapudi, a strategist at Citigroup. “The strength of conviction that there was going to be no more QE at all would be less now than when it was in March, when everything seemed to be going very well.”

US non-farm payrolls only rose by 120,000 in contrast to analysts’ expectations of a near 205,000 increase. This was the lowest gain in five months.

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