Behind the Fed curtain, somewhat

In terms of getting new info on QE3 we didn’t get much from the Fed minutes as this meeting focused more on the extension of OT with just a few wanting to go the route of more printing right now. These FOMC opinions were of course though before the June payroll figure, thus making the minutes somewhat old news in terms of what comes next from them. Outside of more QE, “several participants commented that it would be desirable to explore the possibility of developing new tools to promote more accommodative financial conditions and thereby support a stronger economic recovery.” They didn’t mention what the new tools might be but we can guess some might be similar to what the BoE announced when they gave low cost loans directly to banks to lend out. The Fed still seems intent on force feeding economic growth. On the question of what comes next, “several noted that additional policy action could be warranted if the economic recovery were to lose momentum.” The question for the July 31/Aug 1 meeting thus becomes has it lost enough MO since the June 20th meeting that would result in more QE. Either way, most of us outside of the Fed know the end result if we get more QE, a temporary jump in asset prices (likely short lived), higher inflation risks and no boost to growth and instead gives us a further roadblock to a recovery as the deleveraging process gets delayed again and the misallocation of capital continues.

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