No, you don’t, the world has at least for a moment moved on.
Today is Bernanke’s day. Today we’ll get a rates decision from the FOMC just after noon, and that the much anticipated press conference at 2:15 PM.
Given the signs that the recovery is rolling over, the stakes are huge. We know that QE2 is coming to an end in a matter of days, but what, if any, hints will we get QE3? That is the fundamental question.
Right now, people talk a lot about QE3 — you hear it mentioned withe very bad bit of data — but you don’t see its likelihood reflected in markets anywhere as (the last three days notwithstanding) risk assets continue to slip. Commodities, seen as a major QE2 beneficiary, have been losers lately, especially oil.
Why wouldn’t we get QE3?
Despite what you may have heard, the conditions just aren’t in place for it yet. The economy is not weak enough, and inflation is still running too hot. What’s more, there are now several known critics on the Fed board who have spoken out against it, meaning that any easing will be faced with internal division, undermining the Fed’s credibility (which is already not in a good place). Goldman Sachs has explained how the Fed has a pretty wide range of economic outcomes (in which we’re square in the middle) where it doesn’t have to ease or tighten. Even Bernanke, during his last press conference in April, spoke of the “tradeoffs” of more QE getting less attractive due to inflation.
On the pro-QE side, you have a man who will do anything to kill the specter of deflation. With the government zooming towards austerity, employment weak, and housing still a disaster, the pressure to act is significant.
Nobody expects any announcements today, as the consensus is basically: No more easing, but the Fed on hold forever. Still, market Kremlinologists will be obsessing over ever word in the announcement and the press conference for hints, and of course we’ll be covering LIVE.
See also: Signs the economy is slowing down >
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