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Recent Fed monetary policy decision

August 12, 2010

Analysis of:Fed press release on monetary policy of Aug. 10, 2010 | www.federalreserve.gov

The Fed policy decision released on Tuesday showed they were afraid of a slowing economy, but they literally did nothing about it. So the market response was about as should have been expected, featuring a stock market collapse. But something can be done about it on the regulatory side.

Fed Policy Attitudes Tilt Just a Little, Maybe

January 28, 2010

Analysis of:FOMC Statement, January 27, 2010 | www.federalreserve.gov

In its policy announcement of 1/27/10, the Federal Open Market Committee (FOMC) may have tilted ever so slightly toward recognizing the need to back away from its rigid, long-held policy of extreme monetary ease. The policy kept the recession from being worse, but now an economic recovery seems at hand, though how self-sustaining and adequate remains open to doubt. So a very easy current policy remains needed. Any hints of less rigidity are welcome, but they should be more forthright.

Monetary Policy Still Too Accommodative

December 16, 2009

Analysis of:press release on monetary from Fed 12/16/09 | www.federalreserve.gov

The Federal Open Market Committee today (12/16/09) said that it will keep monetary policy basically unchanged. The Federal funds rate remains near zero; also, as has been the case for about a year now, the rate is expected to remain at "exceptionally low levels .....for an extended period." The Fed continues to worry more that the economy will be too weak than about the potential for inflation or bubbles of some sort. But they should be more even-handed by now as the economy stabilizes.

The Very Risky Monetary Policy Adopted at the September Fed Policy Meeting

October 16, 2009

Analysis of:Minutes of the Federal Open Market Committee Meeting of September 22-23 2009 | www.federalreserve.gov

The Bernanke Fed's balance sheet has expanded by a lot to ensure enough credit to promote economic recovery after the financial crisis of "08-'09. By different means, it has taken the same policy attitude as the Greenspan Fed following the 2000 stock market crisis. It has been guarding fiercely against the worst possible economic outcome, and rightly so up until now. But it is still afraid to let down its guard now that the economy is better, a miscalculation reminiscent of Greenspan's day.

Effect of most recent FOMC decsion on markets, the economy, and potential for inflation

December 20, 2008

Analysis of:FOMC statement of Dec. 16 2008 | www.federalreserve.gov

The FOMC on Dec. 16 lowered the federal funds rate to near zero, and said it will consider further expand its balance sheet to support credit markets, such as expanding holdings of mortgage-backed securities, implementing plans to lend against asset backed securities of consumer and small business loans, and doing virtually anything else it can think of. The Fed also said that exceptionally low levels of the funds rate would be warranted for some time. All this a confession of desperation in face of weak economic conditions and no discernible inflation. For the short-run it is a positive for credit markets and equities (because it promises more profits from cheap financing of future business opportunities). But in the longer run the further ballooning of the Fed's balance sheet inherent in today's spectacular policy maneuver will make control of later inflationary pressures more difficult. The further weakness of the dollar in the foreign exchange demonstrates that concern.

Implications of Monetary Policy Action of 1/22

January 23, 2008

Analysis of:FOMC statement, Jan. 22, 2008 | www.federalreserve.gov

(1) Reasons, apart from the stated ones, behind today's (1/22) surprise policy action by the Fed.(2) Implications for economy and future policy.

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