Thursday, March 31, 2011

QE Is Dead, As QT Is In Full Swing All Around The World

In recent weeks, the Fed and the ECB have begun sounding a tad more hawkish, but official monetary policy is still extremely accommodative.
But outside of the developed world, emerging markets are in the full throes of the opposite of QE, quantitative tightening (QT), as noted in the latest edition of Morgan Stanley's Global Monetary Analyst.
The key idea here is that just as QE is a way of loosening monetary policy without adjusting the headline policy interest rate, QT represents various methods of tightening policy without aggressively hiking interest rates. A key thing to think about is that while these countries want to cool their overheating economies, they don't want to see their currencies surge (remember currency wars?).
QE to QT

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