Fed “Prepared To Provide Additional Accomodation”

The Fed opened the door to QE2 in its statement today by describing inflation as “at levels somewhat below those the Committee judges most consistent with its mandate” and saying it is “prepared to provide additional accomodation if needed” (FOMC Statement).

Financial markets have rallied in the wake of the statement as well as gold while the dollar has been hit.

Their actions today were constrained by the upcoming midterm elections on November 2.  They don’t want to appear to be politically motivated.  But the door has been opened to QE2 at a future meeting should the economy continue to stagnate.