For the first time since 2002, the Fed said that inflation is uncomfortably below target (any time below 1 percent, some sectors of the economy are already in deflation), and the Fed "... is prepared to provide additional accommodation if needed." Credit markets took the Fed's post-meeting announcement on Tuesday and ran a bit too far: the 10-year Treasury note stone-dropped to 2.5 percent, today back to 2.6 percent, but mortgages were little changed. Given the deep policy division at the Fed (the do-nothings paralyzing the do-somethings), I think the Fed will need to see weaker data to resume quantitative easing. Martin Feldstein this week had the best description of the economy: "In a holding pattern." He sits on the National Bureau of Economic Research co...
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