ABN Amro’s Ballard Says Fed `Will Continue to Ease’ Rates
Pubished on Bloomberg Terminal on February 19, 2008
By Ken Prewitt and Tania Haas
Feb. 19 (Bloomberg) — Simon Ballard, macro credit strategist at ABN Amro Asset Management, comments on credit markets and Federal Reserve interest-rate policy. He spoke in an interview from London.
On indications that credit concerns may be resolved:
“The problem was that we had the subprime writedowns coming down in the third quarter, and people thought that would sort of clear the way for the fourth quarter. We then got some disclosure for the fourth quarter, and now we have the writedowns from the subprimes largely behind us, in terms of the generic view from the banks.”
“Short term, there is certainly more volatility to come. Probably one of the most nervous headlines now for the markets
to deal with is this potential split between the monoline businesses and the muni businesses and their structured product-wrapped business. While they want to support the triple-A rating of the muni side, it could be very negative for the corporate credit market if it means significant unwinds of CDO-structured products if they slip from triple-A.”
On what the Fed should do:
“I think the Federal Reserve has to keep on easing. But this is not really a monetary problem in terms of risk appetite
and risk assets. We have China’s inflation numbers out now, which are high. The Fed is sort of caught between a rock and a
hard place. It wants to do the right thing in terms of trying to stabilize equity markets and investor sentiment, but at the same
time in terms of ECB, the Fed has a few issues to consider.
“I believe they will continue to ease. And I think there will be a few more eases to come, to take us down to 2 percent.”
–With reporting by Vonnie Quinn in New York. Editors: Joe Sabo, JoAnne Norton.