“There’s a lot of division at the Fed over whether to do QE3 and there’s a lot of questions as to how much good QE2 did," he said.
He said markets were "deluding themselves" if they expected QE3.
"He can’t rule it out if we had a real double dip, a worldwide shock and a series of events which would trigger another round of QE," Kotok said.
“What Bernanke is saying, what the Fed is saying is the hurdle for additional QE is very high and current information, the best data that is available and the expectations in the markets suggest we are not going to get it, we don’t expect it we advise our clients not to count on it," he said.
Costs of QE3 too much?
Kotok said high oil prices had not been triggered by QE, but rather by trouble in the Middle East and Africa and demand in Asia.
"Now you have a separate question. If you look at the composition of these central bank balance sheets they have large amounts of excess reserves, those excess reserves have no credit multiplier the banks are not lending them out they’re re-depositing them with the federal reserve, in fact around half the deposits are the US subsidiaries of foreign banks because that’s the best place they can go," he said.
"This is not a credit expansion that would lead to prolonged, robust inflation in the very near term.”