What would QE3 mean for the markets?

On Friday, Ben Bernanke will discuss the prospects for the US economy at the Federal Reserve Bank of Kansas City’s annual economic symposium in Jackson Hole. The Fed Chairman used the 2010 symposium to hint at the launch of a second round of quantitative easing (QE2), which triggered a stampede into risky assets and out of the dollar. We doubt Bernanke will flag up QE3 in a few days’ time. But if he did, we think the impact on the markets would be much less impressive and long-lasting than a year ago.