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The Fed Confirms its Fight on Deflation

As I just suggested in my previous post, the Fed is convicted in its quest to stifle even the hint of deflation.  They find that inflation is a fight for another day:

“With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time.

In these circumstances, the Federal Reserve will continue to employ a wide range of tools to promote economic recovery and to preserve price stability.  The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.”

The interesting piece of news in the release is that they have slowed down the pace at which they are buying mortgages by about 3 months.  Considering that the $8,000 tax credit is no longer available in November, the fact that the Fed will stop buying MBS, foreclosures will be increasing and the slow season will be starting should provide for some interesting price action in the real estate market this fall and winter.

As a parting shot, how about Gold over the last 10 years versus every other asset class?  The poor, poor George Washington.  Just look what a Federal Reserve can do with a decade of easy money.

The Lost Decade

The Lost Decade

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