This gives Fed chief Ben Bernanke time to strengthen the economic recovery without feeling pressured to increase interest rates.
Treasuries have returned 41% since mid-2007 if interest payments were reinvested. Even fears regarding the Fed’s third quantitative easing have not derailed bullishness of analysts and economists on bonds.
The Fed has three decades’ worth of inflation management credibility, going back to Fed chief Paul Volcker. Bernanke says the Fed’s policies are not designed to intentionally ignite inflation but to support the economy in bringing the unemployment rate down over time.
Investors concerned about inflation are primarily looking at medium-term to long-term inflation, two to five years out. There seems to be no immediate threat of wage inflation, which is the form of inflation the Fed fears the most.

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