Getting a read on the Fed

The markets focus is upon working out when the Fed will begin its exit from quantitative easing.

Some would say that it has already begun with the dismantling of various "market support" programs. The critical element will be when they begin raising the Fed funds rate.

With the knowledge that any "real" exit could send the economy in the tank again, I wonder whether the reality is that the Fed has little intention of raising rates anytime soon (read that in the next couple of years).

Any increase in rates will weigh heavily upon the economy, the govt's expenditures, and the markets. In many ways, the Fed has no choice, but to try and keep rates at ZIRP until it is patently obvious that the economy is totally recovered. In the same way that the govt is "all-in" on the fiscal side (and is committed to doing whatever is necessary to keep things from going back down), the Fed is in a similar boat. In spite of it's credibility and reputation being on the line, the Fed has little choice, but to keep rates low. Any removal of the foot from the pedal stands a high likelihood of choking off recovery (all that ZIRP for nothing). It has to go "all-in" on the monetary side. Failure to put the economy back on an even keel means we are left in a worse position than when we started.

With the Fed's priority upon the recovery of the economy, it has to risk inflation and the debasement of the currency in order to get us through this period.