The most important story in the world is the change of direction in U.S.
interest rates, which coincides with the change in tone out of the
Federal Reserve. On Wednesday the Fed indicated that so long as its
economic projections come to pass, it plans to slow down on Quantitative
Easing later this year, with an eye towards totally ceasing bond
purchases sometime in 2014.
The markets puked on the news, and interest rates shot up, a move that was exacerbated by Bernanke himself saying he was not worried about the rise in rates.
According to Paul Krugman, it's possible this will end up as a "historic" mistake.
If the economy recovers, then fine, whatever, the Fed will get away with it.
But let's say things sputter out again, and it becomes clear that more easing is necessary. Sure, the Fed can ramp back up QE, and step on the gas pedal again. And the Fed has indicated that it retains this ability.
The markets puked on the news, and interest rates shot up, a move that was exacerbated by Bernanke himself saying he was not worried about the rise in rates.
According to Paul Krugman, it's possible this will end up as a "historic" mistake.
If the economy recovers, then fine, whatever, the Fed will get away with it.
But let's say things sputter out again, and it becomes clear that more easing is necessary. Sure, the Fed can ramp back up QE, and step on the gas pedal again. And the Fed has indicated that it retains this ability.
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