At their September meeting, the Federal Reserve surprised markets by maintaining their program of monthly Treasury and agency MBS purchases. So the taper is again “on hold.” Our economist Robin Anderson looks at the Fed’s decision and examines what it means for the markets.
Posts tagged ‘Bernanke’
169,000 new jobs in August. Sounds pretty good…unless you were expecting 180,000. Combine that with June and July gains getting revised down by 16,000 and 58,000, respectively…and you get something that falls somewhere between ‘super tepid’ and ‘lackluster.’ So, when the Federal Reserve meets next week, what will they think about jobs numbers and how will that affect their tendency toward tapering?
Year-to-date average monthly payroll gains sit at 180,250. That’s lower than the average in 2012, and more importantly, it’s lower than the rate of 200,000 that some FOMC members would prefer to see before cutting the pace of bond purchases. Of the combined June-July revisions (-74,000), an unusually high amount (over half) came from local government – mostly education. Read more
Every summer, Monaco is home to the annual Fund Forum International conference, a high-powered meeting of asset managers and fund selectors. The weather outside the conference is invariably gorgeous, but this year, the climate inside the conference was distinctly chilly. Why? The Fed’s suggestion that the flow of money into the markets in the form of quantitative easing might be coming to an end. This was made abundantly clear in recent market activity, but it was just as obvious with the participants at the Fund Forum. Shoulders were a little more slumped, brows a little more furrowed. Bond managers were downright fractious. Read more
I know you think you understand what you thought I said, but I’m not sure you realize that what you heard is not what I meant.
Alan Greenspan said it, but it certainly captures what current Fed chairman, Ben Bernanke, has to be thinking. In his efforts to be open and transparent, Bernanke has struggled over recent weeks to make himself understood. Markets reacted to talk of tapering the bond-buying QE program as if the Fed had announced that it would be hiking the fed funds rate to 5% by Labor Day. So since the last Fed meeting, Bernanke and several Fed governors have been in the public eye trying to clarify that “tapering” is not “tightening.”
With the release of the latest FOMC meeting’s minutes (available here), and echoed in his speech on July 10 (text here), we saw a bit more clarity that’s meant to ease markets back towards Bernanke’s intended message. Two key points that you can pull from the recent Fed communications: Read more
You may already know this, but because Santa Claus only works for one night a year, he occupies the rest of his time with detailed statistical analysis. That’s why he keeps detailed lists of all the “naughty” and “nice” children. It is, however, little known that Santa Claus also keeps various sub-lists for his statistical analyses. One of these lists is his Economic Naughty and Nice List. To get on Santa’s Economic Nice List, the subject must be achieving positive results for the economy. Santa’s Economic Naughty List contains those who, through action or inaction, do their economies harm. I happen to have seen a leaked portion of the list (Wikileaks again!) and wanted to share here. Read more
Today, the Federal Reserve announced that it will keep its foot on the easy-money pedal until the unemployment rate drops below 6.5% or inflation looks to go above 2.5%. The proposal has been getting some press as of late (you can see my recent post after Fed Vice Chair Yellen brought up the idea in November). This is almost exactly what Chicago Fed president Charles Evans proposed back in 2011. Well, Evans has evidently convinced everyone else at the Fed. Read more
In his high-profile speech to the New York Economic Club yesterday, Fed chairman Ben Bernanke didn’t give any new thoughts on monetary policy. He did reaffirm his view from September – that the Fed will be accommodative not just until the economy recovers, but until it’s clear that the recovery is sustainable.
…we expect – as we indicated in our September statement – that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens. In other words, we will want to be sure that the recovery is established before we begin to normalize policy.
However, there were some interesting thoughts about the fiscal cliff (a term that Bernanke himself coined) and on where we are headed post-cliff. First, and not surprisingly, Bernanke was really concerned about the fiscal cliff and the elevated risk of a recession if a deal is not reached. Second, though, dear Ben was downright sunny about the U.S. economy in the event that Washington can make a deal on fiscal policy. Read more