Is Fed Waiting to Act in Concert with Europe?
With the Fed admitting that they’re less worried about inflation, why aren’t they moving forward with more QE?
A number of traders were baffled by what seems like contradicting actions.
In the Fed statement the central bank said, “Inflation has declined, mainly reflecting lower prices of crude oil and gasoline, and longer-term inflation expectations have remained stable.”
And they also said, "growth in employment has slowed in recent months, and the unemployment rate remains elevated."
Except for the extension of Operation Twist the Fed didn't even hint at any future programs to stimulate the economy.
Considering their mandate, what gives?
Chatter on the floor suggests that the Fed is keeping their powder dry to do something big.
According to top trader Stephen Weiss, there’s a belief among pros that the Fed will announce a program in tandem with the EU – if and when regulators in Europe implement their version of QE.
“That would give the move a great deal of fire power,” says Weiss, managing partner at Short Hills Capital. Could it actually happen?
David Kelly, chief global strategist and JPMorgan, tells us the chatter is at best wishful thinking.
“Don’t expect the Fed to move because of policy in Europe,” he says. That would be misguided.
Instead Kelly thinks the Fed is keeping powder dry in case of a catastrophe. “If there was a problem – a big crisis – such asGreece getting kicked out of the euro – then the Fed would have to come up with something big to calm markets, that’s when we’d get QE.”
CNBC contributor Ron Insana sees it a little differently. Although he’s not looking for any orchestrated response he thinks the Fed commentary about inflation is the big takeaway from the statement.
“Not only is the door open (for more QE) but I think they walk through it,” says Insana. The statement suggests that inflation isn’t the issue, it’s deflation and that’s a key ingredient of QE.
What do you think? We want to know!
Posted by CNBC's Lee Brodie
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Trader disclosure: On June 20, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Stephen Weiss is long ANF; Jon Najarian is long call spreads in ARNA; Jon Najarian is long call spreads in BCS; Jon Najarian is long call spreads in CRZO; Jon Najarian is long call spreads in DB; Jon Najarian is long call spreads in BMRN; Jon Najarian is long call spreads in JPM; Jon Najarian is long call spreads in MMR; Jon Najarian is long call spreads in MS; Jon Najarian is long call spreads in MSFT; Jon Najarian is long CIGX; Jon Najarian is long CBOE; Jon Najarian is long CME; Jon Najarian is long DDMG; Jon Najarian is short EUO; Simon Baker is long JPM; Simon Baker is short PG
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