Did Fed Just Tip Its Hand To a Third Round of Easing?

04-27-2011 • CNBC.com

With a subtle wave of his baton, the aspiring Maestro may have started the music for another round of Federal Reserve monetary easing. Ben Bernanke, chairman of the US central bank and keeper of the keys to stock market money flows, oversaw a tweaking of wording in the Fed’s post-meeting statement that had trading floors buzzing. The statement, which preceded the chairman’s first-ever news conference following a Fed Open Markets Committee meeting, simply stated that the group will “ regularly review the size and composition of its securities holdings in light of incoming information and is prepared to adjust those holdings as needed to best foster maximum employment and price stability.” The change in wording was subtle, but for the market it was shorthand (or perhaps longhand, considering the chairman’s traditionally opaque language) that another round of quantitative easing—QE3 in market parlance—was on the way. After all, the conditions remain ripe for more easing, at least according to the Fed's criteria. The central bank has lowered its growth estimates for gross domestic product and believes inflation levels are muted. So why not some more pump-priming?