Looks like I’ve been wrong on imminent QE3, though certainly I still see it coming in the medium term. Last night’s FOMC Minutes said the following:
A few members expressed the view that further policy stimulus likely would be necessary to promote satisfactory growth in employment and to ensure that the inflation rate would be at the Committee’s goal. Several others noted that additional policy action could be warranted if the economic recovery were to lose momentum, if the downside risks to the forecast became sufficiently pronounced, or if inflation seemed likely to run persistently below the Committee’s longer-run objective. The Committee agreed that it was prepared to take further action as appropriate to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.
There are twelve voting members. One is already dissenting from further easing. “A few” in favour is presumably two. Two more said they would favour more if there was further deterioration. That’s a possible four in favour if things get worse. QE3 is not imminent.
And there is no need for now anyway. The European and global sloth is holding Treasury yields at record lows anyway on safe haven flows. This is keeping the housing recovery going just fine (given that’s what sets mortgage rates). QE3 would simple be a decision to boost the stock market and inflation.
