US Morgan Stanley - Fed’s QE Points to More Monetary Easing in China

A Decisive Step by the US Fed
The US Fed announced that it would purchase US$300 billion of long-dated Treasuries over the next six months. This is a decisive step taken by the Fed in formally adopting quantitative easing (QE), which also features other key policy actions, including the purchase of an additional US$75 billion of agency MBS to make a total of US$1.25 trillion in 2009, increasing the purchase of agency debt by US$100 billion to a total of US$200 billion in 2009, and extending the collateral allowed in the TALF. Many clients wonder what would be the implications of this important policy move by the US monetary authorities on China, the largest creditor country with respect to US sovereign debt.

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