Fed opens door wider to QE3

We're not there yet but comments coming out of yesterday's Fed meeting strongly suggested that the Fed will eventually implement a new round of QE3.

None of this should come as a surprise since a majority of Fed voting members have been bemoaning the high rate of unemployment for a while.

Sure we've seen a modest pick up in growth since the summer, but progress on unemployment has been slow, and publicly, that is the Fed's reason for its focus on QE3.

Economic projections are far from rosy

1. Sluggish GDP growth. In fact, a slight dip in the GDP forecast from Nov.
2. Slow progress on unemployment.
3. Subdued inflation within the Fed’s target.

In Bernanke's opening statement of his press conference, he said the Fed is "prepared to provide further monetary accommodation if employment is not making sufficient progress towards our assessment of its maximum level, or if inflation shows signs of moving further below its mandate-consistent rate.”

So if inflation slips some, the Fed has the extra wiggle room to buy bonds. Helicopter Ben couldn't pass up that opportunity!

And he added in a follow up to a question that QE3 is an “an option that’s certainly on the table.”