The FOMC released its statement today (excerpted below; emphasis added). The statement may as well have been written by the Bank of Japan.
It is what I had feared: the dollar amount is 10% of what economists have estimated may be needed, and, more disturbingly, there is no mention of inflation-targeting.
QE without inflation targeting is like driving slowly without a destination, hoping to arrive somewhere. It’s like “take two aspirin and call me in the morning”.
Clearly, Bernanke and the doves could not get a consensus in favor of targeting. All they could muster was a very weak compromise on some more QE.
Maddeningly, the statement references the Fed’s full employment mandate and then shrugs its shoulders and says “Oh well”. A central bank that does not fulfill its statutory mandates is negligent or incompetent.
Today’s decision means that the US will continue to have a weak, jobless recovery and that millions of people will remain without employment “for an extended period”. There is nothing that the American people, the White House or Congress can do about that. (Aside from amending the Federal Reserve Act.)
Here it is. Read it and weep for the millions of people with no jobs and no prospects:
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate. Although the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, progress toward its objectives has been disappointingly slow.
To promote a stronger pace of economic recovery and to help ensure [why not just delete the word help?] that inflation, over time, is at levels consistent with its mandate, the Committee decided today to expand its holdings of securities.
The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee intends to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month.
The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability.
The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period.
It is what I had feared: the dollar amount is 10% of what economists have estimated may be needed, and, more disturbingly, there is no mention of inflation-targeting.
QE without inflation targeting is like driving slowly without a destination, hoping to arrive somewhere. It’s like “take two aspirin and call me in the morning”.
Clearly, Bernanke and the doves could not get a consensus in favor of targeting. All they could muster was a very weak compromise on some more QE.
Maddeningly, the statement references the Fed’s full employment mandate and then shrugs its shoulders and says “Oh well”. A central bank that does not fulfill its statutory mandates is negligent or incompetent.
Today’s decision means that the US will continue to have a weak, jobless recovery and that millions of people will remain without employment “for an extended period”. There is nothing that the American people, the White House or Congress can do about that. (Aside from amending the Federal Reserve Act.)
Here it is. Read it and weep for the millions of people with no jobs and no prospects:
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate. Although the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, progress toward its objectives has been disappointingly slow.
To promote a stronger pace of economic recovery and to help ensure [why not just delete the word help?] that inflation, over time, is at levels consistent with its mandate, the Committee decided today to expand its holdings of securities.
The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee intends to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month.
The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability.
The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period.
No comments:
Post a Comment