Markets have positioned themselves for some sort of Fed easing, particularly in the form of an extension of Operation Twist. While the U.S. economy has definitely slowed down, which hit along with the flaring up Europe’s sovereign debt crisis, the threshold for further QE hasn’t been reached, according to Nomura. The effect of a “twist of less resistance” would offer limited benefits as the extension would last three to four months at most, they argued. Fed Chairman Ben Bernanke would be better offer disappointing markets on Wednesday, keeping his powder dry to build a bigger case, in case he needs it, later this year.
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