A combination of weak Q1 2012 GDP and softening inflation could push the Fed to another round of monetary expansion.
SG economists look for a two-step easing process:
1) In January 2012, a major announcement with the Fed promising to keep rates at zero until unemployment falls below 7.5% or inflation moves above 3% on aa sustained basis.
2) In March 2012, the announcement of another round of QE. We expect the next round of QE to be concentrated on MBS purchases and be worth about $600bn over six to eight months. This would increase the Fed’s securities portfolio from currently $2.65trn to $3.25trn by the end of 2012.sustained basis.
The specifics of what to expect from the Fed:
And why gold:
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