To QE or not to QE, that is the question

- Macro viewpoint: To QE or not to QE, that is the question "The Fed has moved back into the spotlight. Here we address a number of the “frequently asked questions” about Fed policy."
- Fed watch: And now the hard part "While the Fed has not stated what would prompt renewed quantitative easing (QE), we expect it will act on sustained signs of weakness, and not just a couple of bad numbers. Hence we think the probability of a move at the next two meetings is low, but over the year ahead we see a 35 percent chance of QE."
- The week ahead: Softening manufacturing surveys "Sentiment takes center stage next week in the manufacturing and housing sectors. The Empire State and Philadelphia Fed manufacturing surveys will give an early indication of conditions in August. With the inventory cycle fading and the economy softening more generally, we expect both to paint of picture of slowdown but not outright contraction. Indeed, the industrial production report should show that manufacturing production continued to increase in July. In contrast, the housing data released this week is likely to be weak, with a decline in housing starts in July and depressed NAHB housing index. Homebuilders have kept construction at a feeble pace amid weak home sales and an uncertain economic outlook."

Merrill Lynch US Economic Weekly 20100813

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