When does Ben say no?

As a parent, the easiest thing to do is say yes to the kids and give them what they want. What’s harder is to say no and instill some discipline. The Fed faces a similar issue today in deciding when to say no to extraordinarily easy money. Ben’s in a no win situation for now in that the risk trade dynamics change for the worse if he signals that rates won’t stay “exceptionally low” for an “extended period” and he risks further inflaming asset inflation if he stays put. The economic outlook though won’t change much if the fed funds rate is at .25, .50 or even .75%. The Fed put themselves in this box by cutting rates to almost zero and fingers crossed on where we go from here. ABC confidence rose 2 pts to -49 and is the first gain in a month. The MBA said purchases fell 1.8% to the lowest since Feb as people await clarity on the tax credit. Refi’s rose 14.5% as mortgage rates fell below 5%.

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