Fed may continue QE if US economy fails to perform: Siegel

Even though there are good fundamental reasons for the stock market to be doing well, quite a few traders believe it is only because of quantitative easing. Now with the news that the easing might end by mid-2014, these traders will look to exit stocks, says Jeremy J Siegel, Professor-Finance, The Wharton School to CNBC-TV18. But it is over-reaction on the part of the markets as they believe that this policy will be pursued whether or not the economy strengthens, which is not the case. If the economy does not grow as per Fed expectations and inflations sets down to too lower levels, then the Fed will reverse the decision and continue with QE and may even increase it, he says.

Also Read: See 'clear & present danger' from QE tapering: Macquarie

Below is the edited transcript of Jeremy J Siegel's interview with CNBC-TV18

Q: What did you make of what the Fed had to say and what chairman Bernanke had to say a night ago?

A: I believe the reason the markets reacted so much is because there is a belief that the only reason the stocks have been going up is because of quantitative easing (QE). I think that is wrong. I think there are very good fundamental reasons why the stock market is going up. But when traders think it is only because of QE, with the news that easing might be ending, obviously it will cause those market traders to exit stocks. It is never easy when the Fed begins the tightening mode, even though this is a beginning stage. 1994 was another time, in February, the first tightening after many years gave the bond market a very hard time and the stock market was also unsettled.

Q: You believe there are fundamental reasons to why we have seen stocks going up, does that put you in the camp that thinks that the Fed has not overestimated the recovery in the economy because it has pushed up its prospects for the US economy for the second half as well as for next year?

A: I do think there will be an improvement, but one should also remember that Bernanke was very clear in his press conference that if the economy did not improve as the Fed expected or as inflation set down to too lower levels threatening deflation, the committee would reverse its decision and continue and may even increase QE, which is not a policy that is set in stone. It is evolving, according to the economic data. That is the reason I think the market has overreacted, they believe that this policy will be pursued whether or not the economy strengthens.

Anda sedang membaca artikel tentang

Fed may continue QE if US economy fails to perform: Siegel

Dengan url

https://rokokkanker.blogspot.com/2013/06/fed-may-continue-qe-if-us-economy-fails.html

Anda boleh menyebar luaskannya atau mengcopy paste-nya

Fed may continue QE if US economy fails to perform: Siegel

namun jangan lupa untuk meletakkan link

Fed may continue QE if US economy fails to perform: Siegel

sebagai sumbernya