The Fat Lady has Sung QE3 and Beyond

(US) Fed's Bernanke: Employment situation remains a grave concern, 8.1% unemployment remains elevated and little changed since the beginning of 2012 - FOMC press conf
- Monetary policy cannot cure all economic problems.
- Modest pace of economic growth is inadequate.
- Fed is looking to support gains in housing and other sectors.
- Buying MBS should help reduce long term rates and support the housing recovery.
- Looking for broad based growth and sustained improvement in labor markets
- Will take inflation into account when making asset purchases.
- Accomodation will remain even as the economy improves.
- See an uncertain economic outlook, economy still faces headwinds.
- Headwinds include crisis in Europe and tight credit.

 3 misconceptions:

- 1: Idea of Fed's "printing money" policy is akin to Govt spending - Easing and bond buying is not like government spending and ultimately Fed's policies may bring down deficit and debt

- 2: Low rates hurt savers - Low interest rates impose some costs on savers, but also supports value of other assets. Low interest rate environment ultimately supports a stronger economic condition which ultimately allows stronger wages and employment for the economy

- 3: Fed's Policies will raise inflation risk down the road - Fed has the tools it needs to deal with inflation, which has been at or near 2% goal for years. Policies do not seek to raise inflation. If inflation goes above inflation targets Fed will take a balanced approach to bring it down