Fed’s Plosser comments

They see it all about managing expectations. So with the announcement they managed interest rate expectations a bit lower out to 2013. But now they are concerned they managed expectations about economic growth and employment lower as well, which they believe works to lower actual growth and employment. So now they are trying to adjust […]

Bernanke Admits Economy Slowing; No Hint of New Stimulus

In fact, no one on the FOMC has called for QE3, so it’s highly unlikely with anything short of actual negative growth. So the question is, why the unamimous consensus? I’d say it varies from member to member, with each concerned for his own reason, for better or for worse. And I do think the […]

FMOC Minutes

New Forecasts (central tendency and range of forecasts) in Table 1 below: Long-Run inflation forecast of 1.6-2.0% is basically their target; 2011 and 2012 unemployment forecasts revised up by 0.6-0.7%. Note that low-end of GDP forecast for 2011 is 2.5%. This is above many other forecasters. Interesting Observations from FRB Staff; Outlook revised up, basically […]


Karim writes: Headline near consensus and also very consistent with trend of recent months; but details on soft side Headline payrolls -95k; private payrolls +64k; payrolls ex-census workers -20k The 83k drop in state and local govt payrolls likely skewed by seasonals related to education (-50k jobs) Avg weekly earnings unch and hours worked unch; […]

TIPS 5 year 5 years fwd

This used to be one of the Fed’s major concerns as they are steeped in inflation expectations theory. It could still signal a need to keep a modestly positive ‘real rate’ though the large ‘output gap’ is telling them otherwise. History says they’ll put most of the weight on the output gap, though a negative […]

FOMC minutes on swap lines

[Skip to the end] The FOMC doesn’t seem to treat the swap lines any differently than the domestic lending arrangements: In view of a further widening in financial market strains internationally, the Committee considered proposals to establish temporary reciprocal currency (“swap”) arrangements with several additional foreign central banks. Members unanimously approved the following resolution, which […]

Banking model

[Skip to the end] Once again, we are seeing that using the liability side of banking for market discipline doesn’t work. That’s why deposit insurance exists in every sustainable banking system in the world. It’s also why a floating foreign exchange rate is ‘superior’ to a fixed foreign exchange rate. With fixed foreign exchange rates, […]

U.S. Treasury announces plan to insure money-market holdings

[Skip to the end] On Fri, Sep 19, 2008 at 9:44 AM, Scott asks: These moves HAVE to be bad for the dollar, no? Not much effect per se. Immediate effect is higher interest rates/stronger stocks which very near term helps the USD. But it seems saudis are hiking price which, if it continues, will […]

NYT: Treasury bills program

[Skip to the end] >    >   On Thu, Sep 18, 2008 at 4:21 PM, Eric Tymoigne wrote: >    >   One former FOMC member at least gets it (From the NYT) (well, at least if you >   replace “can create money” by “can create reserve”): >    I’ve heard him before, and he definately doesn’t quite get it. See my […]

NYT: Fed to Give A.I.G. $85 bln Loan and Takeecon

[Skip to the end] The Fed has a major strategic advantage over private sector buyers. With the Fed making the loan, credit spreads in general should narrow. This will add value to AIG’s short credit position which is where most of the mark to market losses are. So the Fed’s actions to reduce systemic risk […]