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Thursday, August 25, 2011

World sets eyes on Ben Bernanke’s Jackson Hole address - QE3 or no QE3?

World is waiting for US fed Chairman Ben Bernanke to announce QE3 (Quantitative Easing 3) on coming Friday in Jackson Hole, Wyoming where he shall be addressing bankers. QE is like a steroid which gives miraculous result in short term but could be fatal in the long term. The risk of US sovereign debt default is increasing.
In USA interest rates are almost near zero (last reported rate was .25 %), despite this US economy is not picking up.
QE shall result in lower cost of funds for US businesses and market is supposed to take it positively.
But one can’t overlook other macro level concerns of the US economy like mounting US debt which is almost commensurate with US GDP, US budget deficit and many others.
As far as global capital markets are concerned they shall take QE3 positively. QE is supposed to raise global commodity prices including crude and metals, and it shall be much perturbing for emerging markets like India which are already struggling to tame the inflation.

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