Now that the Federal Reserve has crossed the Rubicon into its next round of monetary stimulus, the only question for investors Thursday seemed to be what's next.
Markets reacted jubilantly to the Wednesday announcement that the Fed would be adding another $600 billion to its $2.3 trillion balance sheet. Stocks in both US and foreign markets soared as did commodities, while Treasury prices, particularly in the five- and 10-year notes, also jumped.
The action was all a result of what the Fed calls quantitative easing, a process in which the central bank designates a quantity of assets it will buy which hopefully eases credit conditions through lower rates. The program is known as QE, with the second round called QE2.
So with QE2 out of the way and the market ready to ride the Fed's momentum, talk immediately switched to when the economy will see future QE implementations that some market pros think are little more than an inevitability.
"They're already talking about QE3," said Dave Rovelli, managing director of US equity trading for Canaccord Adams. "Eventually we're going to be printing so much money the dollar is going to really go down and everybody's going to try to deflate their currency against us. I just don't know how this could end well."
For the time being, though, concerns about inflation were out of investors' heads as speculation grew rampant that the Fed has sent an unmistakable signal that it stands at the ready with as much easing as needed to restart the economy.
Unemployment at 9.6 percent and a staggering housing market have mired the economy even as stocks and commodities have soared. The Fed is left to find ways to generate real growth that supports the asset gains.
"It is easy to envisage QE2 giving way to QE3, QE4 and beyond because now that the Fed has started down this road again, it will be very hard to stop unless there are clear signs of improvement in this economy," Paul Ashworth, senior US economist for Capital Economics in Toronto, said in a research note.
The Fed's statement following its meeting this week was noteworthy both for its commitment to continuing its asset purchases, and for reiterating worry that inflation is not at a healthy 2 percent or so level. In addition to the $600 billion in Treasury purchases over the next eight months, the Fed will continue with its monthly Permanent Open Market Operations of $35 billion in mortgage bond spending, bringing the additional total close to $900 billion.