In a note to clients this morning, Goldman (aka the Fed's private, unofficial mouthpiece): "In practice, QE2 is likely to continue well beyond June 2011—at least well into 2012—if our forecasts for unemployment and inflation are close to the mark. We believe that purchases could ultimately cumulate to around $2 trillion...Under our longer-term projections it is easy to come up with models that show no tightening until 2015 or later."
Given that it was Jan Hatzius that predicted a $500B QE2 announcement and so allowed the Fed to 'surprise to the upside' with $600B, I wouldn't be surprised if QE2 does reach not just $2T by 2012, but $2.1T, ya' know so they can 'surprise to the upside.'
This note to clients is surely at least a part of the reason why the Dow is up 140 this morning. Otherwise, it looked like we were set up to see a sell the news type of event. Be careful as today's POMO is about to begin.
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