Despite the growing chorus of people predicting QE3, it's still a longshot.

Nomura rates guru George Goncalves explains why the conditions that were in place last year -- when QE2 was introduced -- just aren't here this time.

A few reasons why:

  • -Flation risks still seem more tilted to inflation over deflation (see the below chart).
  • Based on what we've heard from various Fed-heads, there's clearly a lot of dissent internally.
  • Criticism would also be much more intense from overseas, given perceived connection between QE and weak dollar/high commodities.
  • According to Bernanke, what makes QE "work" is the stock of purchases, not the flow of purchases, which means technically the program doesn't end when the bond buying comes to an end.
  • Despite the talk, the market does not anticipate more QE, as evidenced by weakness in "risk" assets.