Bark Worse Than Bite? Dovish Talk may be more powerful than actual QE

Two Federal Reserve economists are telling the Street what it already suspected: Dovish talk may be even more powerful than quantitative easing.

In a research note, the economists wrote that the Federal Reserve’s asset purchases, or quantitative easing, probably provided a “modest boost to economic growth and inflation.” However, the effects of QE would depend in large part on the Fed’s interest-rate guidance, the note said.

“[E]stimates from a macroeconomic model suggest that such interest- rate forward guidance probably has greater effects than signals about the amount of assets purchased,” the economists wrote in the paper, released by the San Francisco Federal Reserve.

The paper, which was not an official Fed policy statement, was by Vasco Curdia, a senior economist at the Economic Research Dept. of the San Francisco Fed and Andrea Ferrero, a senior economist at the New York Fed. It landed during a relative news void Monday, and as many traders wonder when the Fed will begin tapering its asset purchases. Therefore, it quickly became a topic du jour among the trading community, and some read it as a document in support of tapering.


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Mingze Wu

Mingze Wu

Currency Analyst at Market Pulse
Based in Singapore, Mingze Wu focuses on trading strategies and technical and fundamental analysis of major currency pairs. He has extensive trading experience across different asset classes and is well-versed in global market fundamentals. In addition to contributing articles to MarketPulseFX, Mingze centers on forex and macro-economic trends impacting the Asia Pacific region.
Mingze Wu