The QE outlook has started to dim, as Lawrence Summers firms as favourite to replace Bernanke next year. This seems to be a bearish bonds / bullish USD development.
Yesterday, Hilsenrath published an article in the Journal suggesting that Summers was pulling into the lead as favourite to replace Bernanke (on account of his relationship with Obama and team).
Today, the FT’s Robin Harding published a note in which he quotes some dismissive remarks Summers made about QE:
“QE in my view is less efficacious for the real economy than most people suppose”
My read of this is that Summers is keener to end QE, as it has less benefit (and presumably the same costs). In any case, he’s bullish on the growth outlook, so QE under his chairmanship doesn’t have great prospects
“I think the market is underestimating the pace at which the Fed will alter its current course and the consequences of that for interest rates”
On the subject of Summers’ prospects, Harding reports that:
Mr Summers has emerged in recent days as a leading candidate to succeed Ben Bernanke as head of the world’s most important central bank. People briefed on the process say the Obama administration has framed its selection criteria in a way that makes Mr Summers, a former Treasury secretary, the obvious choice.
Mr Summers – who served as President Barack Obama’s chief economic adviser from 2009-2010 – has seldom spoken in public about monetary policy. Markets have little sense of his current thinking and may be surprised by his apparently hawkish stance on QE.