More explicit commentary here from the Fed on QE3. I’d say the recovering economy is a lesser concern. The bigger issue for the Fed is the fact that core inflation is steady and energy prices are once again soaring. So we’re still seeing disinflation in headline inflation, but that is likely to steady over the coming months if energy prices continue to rise. Remember, the Fed thinks QE is inflationary so the last thing they’re going to do is implement QE3 if core inflation is above the upper end of their target range (2%). My scenario of disinflation leading to a possible QE3 in June is going to be 100% wrong if current trends continue.
Fisher’s comments from this morning are attached:
“The tone is a lot better. It’s not brilliant; we don’t have enough new hiring taking place, (but we’re) definitely moving in the right direction.
…Given the improvement in the data that we’ve seen, things are getting better, not worse. I don’t see any need personally for QE3 here.
…I happen to be a little more optimistic about economic movement here.”