Counterparties: What the Fed didn’t do
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The Fed announced action today! Here’s the full statement, which is mostly notable for what the Fed didn’t do: no QE3, no nominal GDP targeting and nothing like what Fed Vice-Chairman Janet Yellen recently teased us with.
In sum, the Fed is extending Operation Twist, selling short-term treasuries and buying longer-term bonds. (NPR has a nice explainer on Twist and why it mostly won’t do much.) Phil Izzo has a great tracker of how the Fed statement has evolved, inserting phrases like, “However, growth in employment has slowed.” As Bernanke said in his press conference, “the outlook has changed.”
The Fed actions, though, mostly haven’t. Which is why there’s a whole host of folks who’re clamoring for the Fed to do more. Greg Ip calls the Fed’s latest move “minimalist” and worries about moving Operation Twist 2.0’s expiration date to December, the same time America is set to fall off its “fiscal cliff“. Scott Sumner argues that Bernanke has actually overseen an excessively tight monetary policy, at least in terms of nominal GDP and inflation. And Justin Wolfers, looking at the Fed’s new forecast, tweeted that the Fed essentially admitted failure on both the inflation and full-employment front – the former being low and the latter being persistently high.
This explains why Binyamin Appelbaum called the Fed’s move a modest “placeholder” and why Felix wrote “it seems that unemployment, on its own, is incapable of persuading Bernanke to do more”. – Ryan McCarthy
And on to today’s links:
The next Walter Cronkite is a “convincingly human” robot that writes 2 million Little League recaps a year – Fast Company
Nick Denton: There isn’t enough gossip on the Internet – Capital New York
How Jonah Lehrer should blog – Felix