Wednesday, October 6, 2010

Regional Feds push for QE

I think these guys are carrying water for Bernanke. They are setting the FOMC up for asset purchases. This is a very bullish signal. Bad for bonds, good for stocks.

Charles Evans, president of the Federal Reserve Bank of Chicago, called for the Fed to do more to charge up the economy, including a new program of U.S. Treasury bond purchases and possibly a declaration that it wants inflation to rise for a time beyond its informal 2% target. "In the last several months I've stared at our unemployment forecast and come to the conclusion that it's just not coming down nearly as quickly as it should," Mr. Evans said in an interview with The Wall Street Journal. “This is a far grimmer forecast than we ought to have,” he added. As result, he said, he favors “much more [monetary] accommodation than we’ve put in place."

Bill Dudley (NY Fed):
Currently, my assessment is that both the current levels of unemployment and inflation and the timeframe over which they are likely to return to levels consistent with our mandate are unacceptable. In addition, the longer this situation prevails and the U.S. economy is stuck with the current level of slack and disinflationary pressure, the greater the likelihood that a further shock could push us still further from our dual mandate objectives and closer to outright deflation.
We have tools that can provide additional stimulus at costs that do not appear to be prohibitive. Thus, I conclude that further action is likely to be warranted unless the economic outlook evolves in a way that makes me more confident that we will see better outcomes for both employment and inflation before too long.

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