Fed seems to know QE doesn’t work to help the economy
Seems the A students know it’s just a tax.
That leaves the Fed in a very bad place. They are utilizing a tool, QE, that only works to bring down rates if markets believe it doesn’t actually work to help the economy.
That is, if markets believe QE is good for the economy, they will price in Fed rate hikes that much sooner, keeping mortgage rates high.
And if they think QE is bad for the economy, they will price in lower rates down the road, which brings mortgage rates lower.
So if the Fed wants lower rates, they know that more QE will only bring rates down if markets think it doesn’t help the economy.
Fed’s Bernanke focused on whether bond-buying works, Fisher says
By Ann Saphir
October 4 (Reuters) — The Federal Reserve’s powerful chairman and architect of the U.S. central bank’s massive bond-buying program is serious about questioning its effectiveness, a Fed policymaker known for his opposition to the program said on Thursday.
“The difference I have with my colleagues is the question of efficacy,” Richard Fisher, president of the Dallas Federal Reserve Bank, told a group of CEOs in Little Rock, Arkansas. “To his great credit, Chairman Bernanke has made this the driving point of every discussion: Is this working or is it not working?”
Fisher, repeating comments he made just hours earlier in his hometown of Dallas, said he believes it is not.
The Fed, he said, has done enough, and it is up to Congress to create tax and regulatory certainty so that businesses feel comfortable hiring again.
“I am not alone” at the Fed in doubting the program’s effectiveness, he said.