Breakeven Inflation Rates as Potential QE Indicator


Author Larry Berman

Posted: 4 Apr 2012 reposted from etfcm

The FOMC took some adrenaline away at their last meeting, which is surprising given Bernanke’s rhetoric of late regarding the need to speed up employment recovery. He knows very well that most of the improvement has been early retirements and people leaving the workforce. Their meeting minutes leave some put protection under the market, and we should now default to looking at the breakeven inflation rates to determine when the Fed might trigger another tranche of QE. This is the only politically palatable way out compared to fiscal austerity.

We don’t think American politicians make the real tough reforms that are needed until 1930s like risks are again presented. Well, if US growth begins to falter, there is not much coming from Europe or Asia to save the world next time around, except flooding the market with liquidity. We remain cautious, but are not selling anymore until the market actually breaks, or gets to the next zone of resistance (1440). A break above that targets a triple top test around 1570. Not a forecast, but a liquidity driven potential if the Fed does another tranche in June.

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