QE3 stumbling block?

“As the chart below shows, the Federal Reserve has never initiated more accommodation when the TIPS inflation breakeven rate was above 2.0%. This level is important because the Federal Reserve adopted 2.0% as an inflation target last January.

When expected inflation is above 2.0%, it does not mean the FOMC has to tighten. But it can mean there is too much inflation to add more accommodation. Of course the Federal Reserve can decide to ignore this target, but since they adopted it less than a year ago, they risk their own credibility in doing so.

This might be the big stumbling block to QE3.”

Source: Bianco Research

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One Response to QE3 stumbling block?

  1. michael says:

    The S&P seems to want to break resistance. If/when it does can it challenge the all time high? Not out of the question but for those caught in the headlights the question has to be asked…..”do I feel lucky…”


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