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Friday, June 15, 2012

Fed Watch: Measures of Financial Stress

One more from Tim Duy:

Measures of Financial Stress, by Tim Duy: Since we are all running downhill and gaining speed with expectations that the Federal Reserve will do "something" on a grand scale next week, I thought I would continue on with my earlier theme of looking at the other side of the story. With that in mind, some measures of financial stress:

Stlfin
Chigfin
Vix

This snapshot suggests that financial stress, at least in the US, is no worse, and on average better, than during last year's Eurocrisis flareup. Nor, as I suggested in my last post, do I think we have enough data to make significant downward revisions to the economic forecast. Yet increasingly market participants are thinking the Fed will move forward with a sizable new QE program. Which means, compared to last year's Operation Twist, expecting the Fed to do more on the basis of less.
Not that they won't; the Eurocrisis is putting plenty of downside risk in the forecast. But it is something to think about.

    Posted by on Friday, June 15, 2012 at 12:15 AM in Economics, Fed Watch, Financial System | Permalink  Comments (6)


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