Easy money conditions to stay

Dunya Executive - - REPORT - Hans Redeker, senior strategist, Morgan Stanley

Even after the Fed rate hike, easy monetary conditions will stay in place. The easing of monetary conditions has a lot to do with the new strength of U.S. commercial banks increasing the availability of capital. U.S. banks running an excess $120 billion of capital after having re-strengthened their balance sheets suggests bank assets will rise again. It seems U.S. commercial banks are increasing the pace at which they convert central bank into high powered liquidity, keeping monetary accommodation loose. Should the Fed keep within this context and stay firm – which is likely – then U.S. real yields are likely to stay offered, putting the dollar especially under selling pressure against high-yielding currencies. (March 14)

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