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Not so fast say Fed minutes :Majority assumed QE2 was going to be pulled in June.



April 05, 2011 – Comments (2) | RELATED TICKERS: SPY , QQQQ , SPXL

FED Minutes showing there is a lot of debate going on regarding the stimulus QE2.


"A few participants indicated that economic conditions might warrant a move toward less-accommodative monetary policy this year; a few others noted that exceptional policy accommodation could be appropriate beyond 2011," the minutes said.

The minutes noted that the Fed is planning for the eventual exit from the current, exceptionally accommodative monetary policy.

"In light of uncertainty about the economic outlook, it was seen as prudent to consider possible exit strategies for a range of potential economic outcomes," the minutes said.

Since the March 15 meeting, several officials from regional Fed banks have spoken out with varying degrees of concern about the outlook for inflation and growth, indications that a vocal minority may want to cut the bond program short and start raising interest rates soon.

Minneapolis Fed President Narayana Kocherlakota last week said the Fed may need to increase short-term interest rates by year's end if underlying inflation rises as he anticipates. Mr. Kocherlakota said he expected "a big upward movement" in core inflation--which excludes volatile food and energy prices--from about 0.8% late last year to about 1.3% by year-end.

But Fed Chairman Ben Bernanke Monday played down inflation fears, saying the rise in global commodity prices is likely to be temporary and shouldn't translate into a broader inflation problem. The Fed chief was quick to add that if his prediction is wrong and inflation begins to mark strong gains, the central bank would respond.

Congress has given the Fed a dual mandate: to maintain low unemployment and stable inflation. Unemployment last month was 8.8% and inflation remains below its objective of 2%.


2 Comments – Post Your Own

#1) On April 05, 2011 at 5:10 PM, davejh23 (< 20) wrote:

There is nothing in the minutes to suggest that QE operations will be extended beyond June.  The Fed's accommodative policy goes beyond QE.  The Fed could end QE AND hike short term rates, and still be in an overly accommodative stance.  Most still assume that QE2 will be pulled in June...that, or continue in stealth mode.

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#2) On April 05, 2011 at 5:16 PM, Borbality (40.58) wrote:

Yeah this doesn't really give much confidence one way or the other. I'm staying cautious through June.


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