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U.S. Remember An Old Problem

The fact that inflation is not posing problems represents an encouragement to continue the asset purchase program. This situation may be caused by the recession in Europe and the slowing growth of China which maintained the price of commodities at low levels. Same for the core inflation, which is maintained between normal parameters. It’s obviously, inflation is not a problem for Fed to consider, at least not on the short term.  On the other hand, the improvement made in the labour market, the increased pace of the monthly created jobs getting close to the optimum level, may lead to the narrowing of QE3 by the end of the year. Another positive aspect sustaining the end of the program is the AA+ ranking of U.S. which recently get a stable outlook by Standard and Poor’s.

If these were good news, here come the bad ones. If the Americans might have enjoyed a few months of accommodation with cuts in domestic spendings and defense, starting with 1st of October they will have to start again the accommodation process because the cuts will enlarge to $19 billion. The question is: in what shape will be the economy of U.S. considering all the changes that will occur during this year? Well, for sure not a wealthy one. Meanwhile, economists enjoy launching theories about the best way that the U.S. economy should be run and when is the best moment to end QE3. In reality, the fragile economy may change plans at any moment.

U.S. Remember An Old Problem by