Fed’s Decision to Hold Rates May Spell QE3, Standard Life Says

Fed Chairman Ben S. Bernanke
Fed Chairman Ben S. Bernanke. Photographer: Joshua Roberts/Bloomberg

The Federal Reserve’s decision to hold interest rates near zero through at least mid-2013 will boost equity markets and may herald a third round of quantitative easing, according to Standard Life Plc.

“There’s evidence of policy makers taking action, and that’s very important,” Keith Skeoch, chief executive officer of Standard Life Investments, said in a call with reporters today. “The signal that interest rates are staying down for a long period of time also opens up the prospect of further policy action through QE3 if for some reason growth should fade.”

Fed Chairman Ben S. Bernanke provoked the most opposition among voting policy makers in 18 years as three colleagues disagreed with the decision to give a specific date to the central bank’s low-rate pledge for the first time. The STOXX Europe 600 Index rallied as much as 2.2 percent today, the biggest gain since September 2010.

“It was an appropriate move and very well-designed in bolstering sentiment and giving a long-run signal,” said Skeoch, who runs the investment arm of Scotland’s biggest insurer. “It should be helpful for markets in the next couple of days.”

Standard Life Investments manages 157 billion pounds ($255 billion) of assets and owns 2 percent of the U.K. stock market.

Slowing global economic growth, Standard and Poor’s downgrade of the U.S. credit rating and a failure to resolve the euro-zone debt crisis have pushed the MSCI World Index to its lowest level since September 2010. The FTSE 100 Index briefly entered a bear market yesterday after falling 20 percent from its high in February.

“We’ve obviously been through quite a difficult period when markets are mainly driven by fear and panic,” Skeoch said. “Equity markets are discounting zero corporate growth if any. What you’re beginning to see is the emergence of value. The triggers for that value to emerge will take a little while to come through.”

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