Last Updated : 16 October 2012 at 11:30 IST
Now there is a widespread fear that the QE3 drive by Ben Bernanke and his team may get suspended, if not abruptly, but eventually as job markets and US retail sales exhibit signs of recovery.
“I expect the QE3 drive to continue well into March next year. In the meantime, we may possibly see reduction in the firepower by half or so. It has to be noted that a mark of permanent recovery is still far away for US economy and hence the QE3 may not get suspended abruptly.” said Martin Patrick, a Kochi based economist.
The third round of QE is an instance to buy Mortgage Backed Securities or MBS to the tune of $40 bn dollars a month. Now, when Operation Twist comes to an end by the end of this year, Bernanke may choose to purchase additional $45 bn worth of treasuries as well.
If sustained improvement is visible across the economy, then the funds allocated to QE3 may dip by half. "But given the recent corrections in gold, I think the investor community has already factored this in." he added.
On gold and crude oil
The gold markets, like any other commodities are driven by factors that pop up out of the blue and change the fundamentals.
“I think for the short-term, gold is not having favourable winds on its sails. It may go up considerably higher to $1800 levels as new factors pop up.” Martin Patrick observed.
Brent crude demand is not expected to come down significantly as there is still some growth happening in emerging economies, he added.
No hyperinflation
He also rubbished claims from certain quarters that a global hyperinflation is on cards. “The term is often loosely or irresponsibly employed by many.” he noted. There would be and there is inflation, but not something to the tune of hyper-inflation.
African economies and Iran would be the most vulnerable pockets in this regard, he concluded. We are living in an era of new normal in inflation.
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