Regardless, some feel that goal could come a lot sooner than 2015, and that has some nervous. Breaching the threshold will not automatically trigger a rate hike, but some are clearly nervous that the goal may be a little closer than others think.
Stimulus: to infinity, and beyond. That's Ben Bernanke, not in "Toy Story," but at the FOMC meeting today.
Today's actions by the Fed may be helpful, short-term, for stocks and commodities, but the bond market is signalling nervousness over inflation.
Bond yields up (closing at session highs), dollar down.
There are two important developments from the Fed:
- An asset purchase program ($85 billion a month) which will continue until there is a substantial improvement in the labor market; and
- A rate guidance program that is supposed to provide information on when the FOMC would consider ending its low interest rate policy. Rates will remain low "at least as long as the unemployment rate remains above 6.5 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's 2 percent longer-run goal, and longer term inflation expectations continue to be well anchored."
The first requirement...unemployment above 6.5 percent ... is a solid target. But the other requirement is not...when do we expect to see 2.5 percent inflation?
Not clear, but it's obvious the Fed is less concerned with inflation than improving the labor market.
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