Did the Fed Make the Right Move?

by: Andrew Horowitz

The Fed basically said it is going to continue on the current path as it does not see any improvement in the employment situation. It appears that many market participants were hoping for an increase to the QE2 quota as they beat down the dollar and bought back bonds recently.

That does not seem to be the right move. The Fed is patient (it has all of the money anyway and can wait as long as possible).

A good summary of the differences between last month’s and this month’s Fed statement is available here.

Of course, Thomas Hoenig dissented ... somebody has to ...

Voting against the policy was Thomas M. Hoenig. In light of the improving economy, Mr. Hoenig was concerned that a continued high level of monetary accommodation would increase the risks of future economic and financial imbalances and, over time, would cause an increase in long-term inflation expectations that could destabilize the economy.

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