The doubts over QE2 are increasing. Yesterday, Dallas Fed's Fisher raised the warning flag when he said that "despite recent speculation in the press and among market pundits, we did little at that meeting to settle the debate as to whether the Committee might actually engage in further monetary accommodation, or what has become known in the parlance of Wall Street as “QE2,” a second round of quantitative easing." Today, St. Louis hawk Bullard makes an even stronger case that the run up in stocks since the August lows is unjustified, or at least, largely premature, when he told CNBC that "Federal Reserve officials
could wait until December before making any decision to ease
monetary policy further if they feel they need more clarity on
the outlook." He added that "We did hit this soft patch in the economy but it's not so
soft that it's obvious that you have to do a lot right now. It's still possible to make the case that
the economy will improve naturally." Most importantly, Bullard clarified that the Fed missing its policy targets do not make a case for further easing a slam dunk, that the economy may still improve without extra help, and that has not heard of any discussion at the Fed moving in the direction of buying a broader range of securities. On the other hand, Bullard also said that it doesn't look like the Fed will be able to get inflation back close to target without more policy help, making the confusion complete.
So there you have it - Greenspanism reincarnated, which as far as the futures are concerned is not a good thing, and if Goldman is right, and the bulk of he QE2 impact has already been priced in, the unwind on November 3 could well be too fast and too furious if indeed all this is not just posturing.
Then again, the uultimate decision maker is Ben. And he doesn't like the middle class.