Tags: David | Tepper | Fed | Easing | Unlikely | Stocks | Plunge

David Tepper: Further Fed Easing Unlikely Unless Stocks Plunge

Friday, 10 Jun 2011 01:10 PM

The Federal Reserve will likely cease to inject money into banks in order to pump up stock prices unless stocks seriously fall without its support, says David Tepper, head of Appaloosa Management.

Under quantitative easing, the Fed buys back Treasuries held by banks in order to spur lending and stock-market growth.

A $600 billion second round of quantitative easing is due to end this month, and a third round (QE3) is unlikely — although not impossible.

"If (the S&P 500 falls) a couple hundred points and financial conditions tightened maybe they would reconsider," says Tepper according to CNBC.

"But there is no logic to QE3 now and the only result might be more food and energy inflation."

Last year, Tepper said stock are a good buy thanks to Fed policies.

ben200gettypress.jpg
Fed Chair Ben Bernanke
(Getty Images photo)
Either the economy was set to improve and stocks would rally or the economy would not improve and the Fed will continue shouldering the market, the latter of which happened and QE2 was rolled out.

Markets have fallen on anticipation that the Fed will stay away although Tepper says price haven't fallen enough to warrant further easing.

Fed Chairman Ben Bernanke has said that further easing is unlikely, as after the U.S. and global economies shake off the effects of the Japanese earthquake and tsunamis and adjust to life without Fed easing, growth will resume on its own.

"With the effects of the Japanese disaster on manufacturing output likely to dissipate in coming months, and with some moderation in gasoline prices in prospect, growth seems likely to pick up somewhat in the second half of the year," Bernanke told a recent meeting of the International Monetary Conference, according to CNNMoney.

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The Federal Reserve will likely cease to inject money into banks in order to pump up stock prices unless stocks seriously fall without its support, says David Tepper, head of Appaloosa Management. Under quantitative easing, the Fed buys back Treasuries held by banks in...
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2011-10-10
Friday, 10 Jun 2011 01:10 PM
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