The Fed's voting committee recently decided to continue its quantitative easing plan and keep interest rates incredibly low. Even though the $600 billion bond buyout program had some inflation hawks worried, the vote was unanimous.
Clearly, the short-term concern is inflation - will prices rise as the Fed attempts to spark growth by pumping more money into the economy? The voting committee, especially those considered inflation doves, think not. In fact, in their official statement offered after the vote, the Fed claims that indicators of inflation are, for the most part, not present at this time.
Seeing as the Fed seems to have short-term concerns under control, it is about time to focus on long-term effects. What happens when the buyout program comes to an end and the buying stops? Who steps in for the Fed? Will foreign buyers still be interested? The answers: interest rates will more than likely rise, there really isn't a natural buyer to step in, and foreign buyers will most likely begin to sell, causing interest rates to spike even higher.
So let's stop focusing on inflation. Unless, of course, it effects the Big Mac.
-The Finance Whisperer