Jonathan's Feed
Dec 15, 2013

Fed could set off year-end fireworks

NEW YORK (Reuters) – The possibility that the Federal Reserve could finally start to trim its extraordinary stimulus for the economy could make this week an explosive one for financial markets.

Though the odds still point to no major policy change when U.S. central bankers meet December 17-18, most of the recent domestic economic data suggest the beginning of the end of their massive bond-buying program is coming sooner than later.

Dec 11, 2013

Israel’s Fischer picked to be next Fed vice chair: source

By Steven Scheer and Jonathan Spicer

(Reuters) – Stanley Fischer, who led the Bank of Israel for eight years until he stepped down in June, has been asked to be the Federal Reserve’s next vice chair once Janet Yellen takes over as chief of the U.S. central bank, a source familiar with the issue said on Wednesday.

Fischer, 70, is widely respected as one of the world’s top monetary economists. He is seen as a pragmatic policymaker and has praised the Fed’s extraordinary steps to boost the U.S. economy. At the Massachusetts Institute of Technology, he once taught current Fed Chairman Ben Bernanke and Mario Draghi, the European Central Bank president.

Dec 11, 2013

For Fed, delivering a message on policy path is new focus

NEW YORK/SAN FRANCISCO (Reuters) – Now that the central question before the Federal Reserve has shifted from whether to cut its extraordinary stimulus to when exactly to pull back, the debate at next week’s meeting will center on how best to communicate that plan.

While recent and brisk improvements in the labor market have raised the chance that policymakers might taper at their meeting next week, most economists expect the Fed to keep its $85 billion-a-month bond-buying program in place for a bit longer.

Dec 11, 2013

Preview – For Fed, delivering a message on policy path is new focus

NEW YORK/SAN FRANCISCO (Reuters) – Now that the central question before the Federal Reserve has shifted from whether to cut its extraordinary stimulus to when exactly to pull back, the debate at next week’s meeting will center on how best to communicate that plan.

While recent and brisk improvements in the labor market have raised the chance that policymakers might taper at the upcoming policy meeting, on December 17-18, most expect the Fed to keep its $85 billion-a-month bond-buying program in place.

Dec 9, 2013

Carney sees hopeful signs in UK economy

NEW YORK (Reuters) – Britain’s economic recovery is showing signs that it can reach self-sustaining momentum, but monetary policy will need to remain exceptionally loose for some time to come, Bank of England Governor Mark Carney said on Monday.

Responding to some arguments that rich economies might be stuck in a rut of low growth, Carney said in a speech that he was confident that monetary policy was gaining traction and that a ‘liquidity trap’ had been avoided.

Dec 9, 2013

Bank of England’s Carney sees hopeful signs in UK economy

NEW YORK, Dec 9 (Reuters) – Britain’s economic recovery is
showing signs that it can reach self-sustaining momentum, but
monetary policy will need to remain exceptionally loose for some
time to come, Bank of England Governor Mark Carney said on
Monday.

Responding to some arguments that rich economies might be
stuck in a rut of low growth, Carney said in a speech that he
was confident that monetary policy was gaining traction and that
a ‘liquidity trap’ had been avoided.

Dec 6, 2013

Fed’s Plosser: positive jobs growth another reason to taper QE

PHILADELPHIA (Reuters) – A top U.S. central banker on Friday praised last month’s positive jobs growth, saying it was reflective of a stable rate of expansion over the last several months and that he hoped it would spur the Federal Reserve to trim its policy support.

Charles Plosser, the hawkish president of the Philadelphia Fed, said the November payrolls data released earlier on Friday reinforced his view that the central bank should begin to wind down its accommodative bond-buying program.

Dec 5, 2013

Fed officials call for clear plan on wind down of QE3

COLLEGE STATION, Texas/FORT LAUDERDALE, Florida (Reuters) – The Federal Reserve should telegraph the end of its current massive round of bond-buying by committing to a set schedule for the wind-down, two top policymakers said on Thursday.

Their embrace of the idea, after two others have publicly supported it in recent weeks, suggests it may be gaining traction ahead of a much-anticipated December 17-18 Fed policy meeting.

Dec 5, 2013

Fed should telegraph QE reductions, Lockhart says

, Dec 5 (Reuters) – Once the Federal
Reserve finally trims its bond-buying program, it should then
commit to an effective schedule that would wind it down
completely, a top U.S. central banker said on Thursday.

Atlanta Fed President Dennis Lockhart sounded more upbeat on
the prospects for the U.S. economy when he said in a speech it
was reasonable for investors to expect the Fed’s asset-purchase
policy to be wound down over the coming year.

Dec 3, 2013
via MacroScope

For the Fed, pros and cons of lowering yet another rate

Photo

Now that the Federal Reserve is finally – we think for real this time – preparing to reduce its bond buying program, trading floors are abuzz with what it could do at the same time to offset such a move. Tapering its quantitative easing (QE) program would signal, after all, that the Fed thinks the U.S. economy is healing and that monetary policy needn’t be as accommodative as it has been. But since inflation is still too low and unemployment is still too high, the thinking goes, the central bank will want to do something that proves it is serious about keeping interest rates low for a while longer in order to make sure the economic recovery is durable.

There are a handful of ways the Fed could say it still cares when it trims QE, be it this month or some time in the first half of next year. But one that has traders’ tongues wagging is cutting the interest rate the Fed pays banks on excess reserves. The so-called IOER has been set at 0.25 percent since the central bank introduced it in 2008, when the economy was on edge. With every additional asset the Fed buys under QE it creates reserves that the private banks often end up parking at the Fed itself, given rates are so low across the board. As it stands, reserves are $2.5 trillion and counting.