The Fed kicked the door open to more QE yesterday but it did not actually step through. Now, every weak US economic report will ramp up expectations of another dose of liquidity from Dr. Bernanke.
The situation with the ECB will be similar. Instead of being data dependent, we’ll be bond market dependent. Every push higher in Spanish and Italian debt will increase speculation that the ECB will buy debt on the short-end of the curve and the EFSF will be called upon to buy debt from the governments at auction.
That’s gonna start to get tedious pretty quickly…
