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CICC, Pimco Say Fed Third Round of Quantitative Easing Unlikely

The Federal Reserve probably won’t have a third round of asset purchases, known as quantitative easing, unless the U.S. economy slips back into recession, said China International Capital Corporation and Pacific Investment Management Co.

“Politically, the bar is very high,” Matthew Nest, senior vice president and head of account management at PIMCO’s Hong Kong office said at a forum in the city today. “From the perspective that we are not facing a deflationary spiral, at least in a near-term, or a double-dip recession,” so further easing is unlikely, he said.

Fed policy makers have tried to spur U.S. economic growth by holding the main interest rate near zero since December 2008 and expanding its balance sheet to $2.79 trillion. Federal Reserve Bank of Dallas President Richard Fisher said yesterday policy makers have “done enough” on stimulus and should focus on price stability.

In the absence of a “second dip” in the economy, the Fed is unlikely to expand its assets purchases, said Aolin Liu, executive director of Beijing-based CICC, referring to additional quantitative easing. The “fear of inflation” is a factor, she said.

Liu and Nest were both speaking at the Asia-Pacific Debt Investor Forum.

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