QE3 off the table for now

I have been a bit busy so haven’t been able to post for the last few days.

Today we had the FOMC meeting  announcement and Ben Bernanke’s press conference. I listened to the press conference and I think the key takeaways from the conference were as follows

  • There is a soft patch in the economy but it appears there are some temporary factors like Japan causing it, although he did add that even accounting for these temporary factors the economy is still growing slower than they would have expected. So although they expect stronger growth in the 2nd half of the year it is slower than older estimates
  • I think Bernanke clearly laid out that QE3 is off the table. He said the current situation is different than August 2010. The main difference he said is that there were clear deflationary pressures building up last year but not this year. In fact there has been a slight uptick in core inflation. He also added last year the average private job growth till August 2010 was 80K/month, this year so far it has been 180K/month.
  • Another important point from the press conference was that he made it pretty clear he prefers higher capital requirements for large banks and based on some studies the fed has looked at, higher capital requirements have minor affects on availability of credit while reducing chances of a financial crisis by a large factor.

Based on what Bernanke laid out, I expect the next few days to weeks could be bad for Gold since the fed has taken QE3 off the table and even the Greek issue seems to be under control just for the very short term.

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