No QE3 Announcement at Jackson Hole

FOR IMMEDIATE RELEASE
(Free-Press-Release.com) August 29, 2011 --

The heads of the world’s central banks gathered in Jackson Hole, Wyoming last week and seemed to agree that monetary policy itself cannot maintain global economic growth. Federal Reserve Chairman Ben Bernanke spoke in favor of adopting a “good, active housing program” in order to turn around the depressed US housing market and warned lawmakers against taking any moves that may negatively affect short-term growth. This statement seemed to refer to attempts by the Republicans in Congress to cut the budget proposed by President Obama’s democratic administration. Ewald Nowotny, member of the European Central Bank’s governing council, also sent a clear signal to Eurozone governments that they should broaden the authority of their regional financial aid funds.

“A big part of the economic policy which supports stable economic growth in the long-term perspective is located outside the central bank’s authority,” Bernanke said. For his part, head of the European Central Bank Jean-Claude Trichet said that “there is huge potential to reform our economies and increase their growth potential and create jobs.” Trichet also met with European lawmakers in Brussels on Sunday to discuss how to manage the crisis.

Meanwhile, DT Trading analysts report that China is again tightening its monetary policy. The People’s Bank of China expanded regulations for reserve capital for commercial creditor banks to manage liquidity and limit inflation. Reserve requirements are extending to commercial banks’ margin deposits, which are collected from clients for a loan – a measure which may drain 900 billion yuan ($140 billion) from the banking system in six months, reported Lou Din, an economist with Bank of American Merrill Lynch. China has already raised reserve requirements to a record 21.5% for the biggest banks in order to fight inflation, which is picking up speed to reach its highest rate since 2008. On August 26, the London office of Capital Economics Ltd reported that the measure taken may signify a freezing of further increases this year, since they had earlier assumed that demand would increase by one percentage point by the end of December. A tightened monetary policy will have a negative effect on the economy of the world’s largest exporter.

Finally, the main news of the week will be on employment in the US. According to freshly released predictions from economists, hiring of new employees likely slowed in August, while the manufacturing industry in the US contracted for the first time in two years after Americans lost confidence in the prospect of a stable economic recovery.

According to the average estimate among 65 analysts polled by Bloomberg, the number of people on the payrolls is predicted to have increased by 75,000 after a 117,000 increase in July. DT Trading analysts, along with the rest of the market, will be waiting for the US Department of Labor to make the actual statistics public after September 2. The report released around the same time may also show that factories decreased their production in the previous month for the first time since July 2009.

DT Trading Limited Analytical Department

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