Tags: Kos | QE | Fed | minority

Former Fed Official Kos: Markets Listening too Closely to Fed Minority

By    |   Friday, 01 March 2013 08:13 AM

Financial market participants are giving too much attention to the minority voices at the Federal Reserve that are calling for curtailment of the central bank’s quantitative easing (QE), says former New York Fed Executive Vice President Dino Kos.

“I don’t see that minority is getting much bigger,” Kos, now head of global regulatory affairs at CLS Bank International, tells CNBC.

With Fed Chairman Ben Bernanke commanding a clear majority at the central bank, QE will continue unabated, Kos says. The Fed is purchasing $85 billion of Treasury and mortgage-backed securities a month.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

Estimates that the Fed will continue QE for another six to nine more months are too conservative, he says. “You’ll see QE longer than that.”

The economy’s weakness dictates that timetable, Kos says. “This is not an economy that’s overall growing in a healthy way, even though [some] sectors really are doing better,” he maintains.

“We’re seeing fiscal tightening, the export sector is slowing down, Europe is still a problem and there are signs of slowing in other parts of the world.”

Bill Gross, co-chief investment officer at fund giant Pimco, thinks the Fed can unwind its accommodation smoothly. “I think it ends rationally and temperately,” he tells CNBC.

Gross believes the Fed can pull out if its quantitative easing in steps. “The first step would be to reduce quantitative easing from $1 trillion to perhaps $600 billion and then $400 billion and all the way down to zero, perhaps in the next nine to 12 months.

“These are small steps. I was going to call them baby steps, but those are big babies,” he explains.

“The Fed basically is trying to ease its way out of this and produce a normalized economy and normalized market.”

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

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Financial market participants are giving too much attention to the minority voices at the Federal Reserve that are calling for curtailment of the central bank’s quantitative easing (QE), says former New York Fed Executive Vice President Dino Kos.
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2013-13-01
Friday, 01 March 2013 08:13 AM
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