Don't expect QE3 in even September FOMC meet: Deutsche Bank

Despite Bernanke keeping the stimulus hopes alive, Peter Hooper, managing director and chief economist, Deutsche Bank doesn't expect any announcement of liquidity injection even in September FOMC meeting .

According to him, if the employment data for August is weak only then Fed may be convinced to go ahead with quantitative easing.

“If we get a weak report something significantly less than 100,000, then that certainly goes a long way towards convincing them they need to do more. But, if the report is in the range of 50,000 plus as we had last month, along with some other data looking a little bit better, they may hold off and not go with another QE at this point,” he elaborated.

Below is the edited transcript of Hooper’s interview with CNBC-TV18.

Q: What do you think the Fed will do on September 13 at the FOMC meeting because he mentioned that he has left the door open for quantitative easing and that the labour situation has got grave? Do you think he will move on quantitative easing come September 13?

A: I don’t think he is quite there yet, I think it will depend a bit on some important day that they come out next week and what the employment numbers look like for August. If we get a weak report something significantly less than 100,000, then that certainly goes a long way towards convincing them they need to do more.

But, if another report is in the range of 50,000 plus as we had last month, along with some other data looking a little bit better, they may hold off and not go with another QE at this point.

They already have a QE program in place; the maturity extension program, Operation Twist, they would like to see that see them through until up to the election. But obviously if the economy is looking weaker, if the news between now and September 13, is not good, only then they may think of they adopting a QE.

My expectation is the employment report should be good enough to allow them to hold off and I am not expecting QE in September at this point.

Q: What is your expectation from the ECB on September 6? Do you think ECB will manage to entice investors back from the beach?

A: One of the elements that factors into the Fed’s decision will be what the ECB does and how the markets react. If the ECB disappoints and the bond buying program is not laid out clearly or doesn’t look very promising and the stock markets drop substantially, then that would factor into the Fed’s decision.

Right now what the ECB does is a bit more important than what the Fed does in terms of how the stock markets react.

If, the ECB comes through with a program, which is positively viewed by the markets, it would allow the Fed to hold off. I don’t think there will be a large disappointment sell off if the Fed didn’t do anything in that environment. My sense is the strengthening of the stock market over the last month has been much more affected by ECBs action than expectation of Fed’s action or QE3.