After the Fed sat,
Fed Chairman Ben Bernanke made it clear that no decision on additional asset purchases has been made and that any additional balance sheet expansion would be a “collective” decision, however …
• Bernanke made it clear that maximum sustainable employment and stable prices (defined as 2% inflation of personal consumption expenditures) are on “equal footing”.
• The current projections are for unemployment to be significantly too high for years and inflation to be at or below the Fed’s target. That is a strong argument for additional monetary accommodation.
• In the Q&A, Bernanke made it clear that even if inflation moved above the target – and unemployment was still very high – the Fed would only slowly pursue policies to reduce the inflation rate.
• The minutes for the FOMC meeting will probably contain discussion of the outlook for the balance sheet and possible further asset purchases. Those minutes will be released in 3 weeks.
Although the FOMC might still wait until one of the two day meetings in April or June, the likelihood of QE3 being announced at the March 13th meeting has increased significantly
Inflationary monetary policy for quite some time. Bonds as an asset class are eliminated from consideration for the moment, and only really have one direction to move. That leaves stocks and commodities, and I suppose currencies, although they fall under bonds for ‘investment’ purposes.
January 29, 2012 at 7:40 pm
[...] is the projected time-frame and rate of increase in the short end of the rates. Also in my previous post found here the context is provided. That is exactly what we did. When the dollar reversed and gold started to [...]