Friday, August 12, 2011

The Fed's peculiar decision

Dave Nicklaus has a piece in today's Post-Dispatch talking about the reasoning behind the Fed's decision to declare that it will pursue its near-zero-interest-rate course until at least mid-2013. The article includes a couple of quotes from yours truly.  I think there's very real confusion about what the Fed has in store for us.  Are they laying the groundwork for QE3 (given the apparent uselessness of QE2, I hope not)?  Are they signalling that they aren't going to do any more than they've already done?  Are they committed to the policy even if inflation picks up?  Will any inflation response be hampered by this declaration?  Do they really have a clear idea of what to do?