QE3 - here we come!

Here comes QE3

Sam Ro

BusinessInsider,

2 June, 2012

Most people agree that yesterday's jobs report was a disaster.

To many, this just meant the chances of more quantitative easing had increased. Surely, this is why gold prices spiked yesterday.

Vincent Reinhart, Morgan Stanley's chief U.S. economist, thinks there's an 80 percent chance that a new quantitative easing program is announced at the June 19-20 FOMC meeting.

"Slower employment growth, worsening strains in European markets, and a gloomier assessment of US politicians’ ability to steer clear of the impending fiscal cliff makes it likely that the Fed will mark down its already tepid forecast," he wrote in a note to clients yesterday.

Here's what he thinks it'll look like:

As our base case, we assume the Fed would purchase $525 billion in 10-year duration equivalents, $475 billion in par amount. We expect the program to last nine months and remove $53 billion par amount of securities from the market each month – in line with previous programs.