The FOMC is meeting next week, and the huge question is whether the Fed will stand pat or start nibbling at more Treasuries.Today’s dollar drubbing may have been the result of increased expectations that indeed some form of QEII (quantitative easing, round 2) will in fact begin next week.
So what will happen? Nobody has any idea if the latest report from WSJ’s John Hilsenrath is right.
Some on the Fed are ready to take more action. Others want to see more evidence of worsening. Others don’t think action could possibly do any good.
When you combine the existing internal divisions with the unclear data — the economy seems to be in a soft patch, and yet some of the recent data has been decent — it makes it even harder to figure out what’s going on.
But what we do know is that the Bernanke has lost any ability to convey a united Fed that will clearly stand athwart deflation, and it’s hard to see that being good for the market.
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