Fed to continue having low interest rates: Societe Generale

Patrick Legland, Global Head of Research at Societe Generale feels that there is complete confusion after US Federal Reserve chairman Ben Bernanke's speech. On Wednesday he made clear he had no intention of cutting short his USD 85 billion-a-month quantitative easing programme in the near future.

Legland told CNBC-TV18 that Barnanke has always been very supportive and this announcement means Fed will continue to have relatively low interest rates. Also unemployment rate in the US in the region will not stay in the high 6-6.5 percent range, he added. Also read: Bernanke was being dovish: StanChart's Sarah Hewin Below is the verbatim transcript of his interview to CNBC-TV18 Q: Is it the possibility of quantitative easing (QE) reduction that is spooking market. How are you interpreting what was said in the US last night? A: There is complete confusion on what has been said by Ben Bernanke. On one side he has always been very clear that he would be lagging, he would remain supportive to the economy. It means that we will not have unemployment rate in the US in the region of 6-6.5 percent. The Fed will continue to have relatively low interest rates. Q: Japan cracking nearly 7 percent, is it reactionary or was this expected considering the solid run up that we had seen because the Bank of Japan (BoJ) on Wednesday had made the right moves and Nikkei had rallied, in fact today also it was up 2 percent. What led to this selloff? A: On one side the communication either from the Fed, from the European Central Bank (ECB), I would say from most central bank is relatively clear. The policies that Bank of Japan has where they try to re-boost inflation is extremely risky, visibility is low. The risk is that at some point the market realise that inflation is not coming back and you will see we have a surge in interest rate in Japan. That's exactly what has happened today. There may be some question marks on what Bank of Japan is doing. We have to add to this additional information coming from China this morning saying that the activity might be contracting, purchasing managers index (PMI) is not good and all this is used by investors as a great opportunity to take some profits. This is may be to come back to the market after a correction.