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Strategist: Fed Policy Likely to Favor Obama Victory in 2012

Monday, 02 May 2011 08:43 AM

The Federal Reserve's monetary policy will favor Barack Obama in the 2012 presidential elections, says Thanos Papasavvas, head of currency management at Investec Asset Management.

Economic recovery tends to favor an incumbent, while a deteriorating economy will prompt the Fed to unleash a third round of quantitative easing in order to stave off a double dip, which is the only thing that could pretty much topple a first-term president.

"History is very much on the side of the incumbent president and unless we have a double-dip recession with a significant increase in unemployment I don’t believe Obama will lose 2012," Papasavvas tells CNBC.

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Barack Obama
(Getty Images photo)
"On the economic side, any signs of a deteriorating economic environment will see the Fed enacting QE3 (the third round of quantitative easing, or creating money) and hence indirectly reducing the probability of the economy derailing Obama."

The Federal Reserve is due to end a $600 billion quantitative easing program in June.

The program — basically where the Fed prints money to buy back government debt from banks so they'll lend and fuel economic growth — has been criticized for allegedly fueling inflation here and abroad.

Fed Chairman Ben Bernanke has said that quantitative easing will end June.

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Fed Chair Ben Bernanke
(Getty Images photo)
While unemployment rates are still high, further easing would be counterproductive to economic recovery by fueling inflationary pressures.

"The trade-offs are getting less attractive at this point," Bernanke says, according to the Associated Press.

"It's not clear that we can get substantial improvements in payrolls without some additional inflation risk."

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The Federal Reserve's monetary policy will favor Barack Obama in the 2012 presidential elections, says Thanos Papasavvas, head of currency management at Investec Asset Management. Economic recovery tends to favor an incumbent, while a deteriorating economy will prompt the...
Strategist,Fed,reserve,bernanke,obama,Make,Sure,Wins,2012
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2011-43-02
Monday, 02 May 2011 08:43 AM
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