Thank God For Bernanke

The FOMC met this week and made the following announcements:

1. The Fed believes that, without further QE, economic growth will not be strong enough to generate sustained improvement in labor market conditions (i.e., unemployment below 7%).

2. The Fed will continue purchasing additional MBS at $40 billion per month, and will also purchase longer-term Treasuries at $45 billion per month, for a monthly increase in the Monetary Base of $85 billion (3%), or $1 trillion annually (36%).

3. If unemployment does not decline to 6.5%, the Fed will continue its purchases until such a decline is achieved. However, that does not mean that QE3 will necessarily end when unemployment goes below 6.5%.