I am looking for a strong indication that we are much closer to deflation than inflation in Friday’s CPI report. Economists call the CPI down to 0.7% year-over-year which would be almost half of November’s 1.3%. Sure, stability in the core CPI will keep fears at bay for a lot longer but as history shows when inflation/deflation bit and show up in annualized figures there is no quick way out of it. The Fed has been playing with fire and I think they will come out of it torched.
Interesting to see how the Fed reacts once the CPI will show deflation as it has in the Eurozone last week. I do agree with you that the Fed will get burned as it has before. No reason for history not to repeat itself.
Taper… HA! Yeah right.