Is the Fed’s concern over Wall Street volatility a sign of QE4?

The Federal Reserve debated in its meeting late last month whether or not to officially comment on the volatility that transpired in the stock market between September and October. Although the United States central bank is mandated to ensure a stable labor market and consumer prices, it is prevalent that the Fed monitors financial developments on Wall Street.

According to the minutes released Wednesday, Fed board members discussed if it should insert comments about the rollercoaster market. Fed members noted that a brief remark to the stock market turmoil would highlight that the Fed “was monitoring financial developments while also providing an opportunity to note that financial conditions remained highly supportive of growth.”

In the end, the Fed refrained from making any official comment about the stock market because  doing so “risked the possibility of suggesting greater concern on the part of the Committee than was actually the case, perhaps leading to the misimpression that monetary policy was likely to respond to increases in volatility.”

The central bank ended its massive third edition of quantitative easing last month so most analysts see the main Fed topic to be raising interest rates in the middle of next year, something that has been speculated for several weeks. We should point out, however, that talks of a rate hike has been discussed repeatedly since the financial collapse, and may perhaps be premature.

Rather than honing in on rate hikes, shouldn’t we talk about the Fed potentially introducing QE4? As we reported, pundits and Fed officials haven’t ruled out the possibility, especially considering the market has fluctuated, though it has been on a tear in the last week or so.

With the Federal Open Market Committee concerned about market volatility then it could very well be a signal that Fed Chair Janet Yellen and her cohorts are thinking about inciting a fourth round of easing in order to inject stimulus in the markets.

Here is what Peter Schiff wrote over the weekend:

“I simply expect, as no one else seems to, that the Fed will go back to the well as soon as the markets scream loud enough for support. At that point, it should become clear to everyone that there is no exit from the era of QE and that there is nothing normal or organic about the current rally.”

Although financial experts and industry analysts are debating interest rates, the real story should be the fragile U.S. economy and its need for cheap money, low interest rates and monthly stimulus. Remember, the stock markets since the Great Recession have been carried by the spiked punch bowl.

Indeed, the training wheels have been taken off and records are still being made in the stock market. It’s inevitable that markets will fall of the bicycle and then cry for their mother, Janet Yellen.