What Bernanke didn’t tell us

December 14, 2012

Federal Reserve Chairman Ben Bernanke spoke to reporters for well over an hour at his quarterly press conference this week, but he was vague on the most important question of monetary policy today: what exactly would it take for the central bank to either ramp up or curtail the pace of monthly asset purchases? Since bond buys have effectively replaced interest rates as the dominant tool of Fed policy in recent years, the central bank’s new thresholds, which reference only rates, are not particularly useful.

Fed’s numerical thresholds are a bad idea: Goldman’s Hatzius

December 12, 2012

Updates with Fed decision

The Federal Reserve on Wednesday took the unprecedented step of tying its low rate policy directly to unemployment, saying it will keep rates near rock bottom until the jobless rate falls to 6.5 percent. That’s as long as inflation, the other key parameter of policy, does not exceed 2.5 percent.

Fiscal tightening + monetary stimulus = ‘borderline insanity’?

December 12, 2012

It’s a curious pattern being repeated around the industrialized world. Governments are trying frantically to tighten their belts even as the monetary authorities loosen their purse strings. This week in the United States is a perfect example: the Fed looks set to extend its bond purchase program even as Washington fails to reach an agreement to avoid the dreaded “fiscal cliff.”

Italian political curveball

December 10, 2012

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Italy’s borrowing costs over ten years drew closer to five percent after a decision by Prime Minister Mario Monti to step down early left the country’s political future unclear, hurting riskier euro zone debt.

America is not Greece: Low funding costs give U.S. government room to borrow

December 5, 2012

Is the U.S.on the road to Greece, as some politicians have proclaimed?

Most economists say the comparison is nonsense. At a towering $15 trillion, the U.S. economy is not only the world’s largest, it is also more than 50 times the size of Greece’s. This gap makes any type of comparison difficult – it would be like analyzing trends in Maryland in relation to the entire euro zone.

Hey, at least it beats the Mayan outlook

December 4, 2012

A panel of economic luminaries took the stage in Chicago this afternoon to join in a tradition repeated this time of the year in cities across the country, opining on the outlook for the coming year.

Geithner’s gauntlet: Social Security is a “separate process” from fiscal cliff talks

December 3, 2012

Social Security should not be part of the current negotiations over the U.S. budget – that was the message from outgoing Treasury Secretary Timothy Geithner over the weekend. During a veritable tour of Sunday shows aimed at addressing negotiations surrounding the “fiscal cliff” of expiring tax cuts and spending reductions, Geithner told ABC News’ “This Week”:

Could the private sector stage a stimulus plan?

November 26, 2012

Since the financial crisis, the federal government has implemented a fiscal stimulus plan and the Federal Reserve took to the road of monetary stimulus, actively seeking new routes to revive the U.S. economy.

The trouble with the Fed’s calendar guidance on rates

November 21, 2012

Sometimes, communication can be the art of what not to say. Federal Reserve Chairman Ben Bernanke took pains this week to make clear that the central bank’s indication that it will likely keep rates low until mid-2015 does not mean it expects growth to remain weak for that long.

How big will the Fed’s QE3 end up being?

November 16, 2012

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Polling data courtesy of Chris Reese

We’ll know it when we see it. That’s essentially been the Federal Reserve’s message since it launched an open-ended bond-buying stimulus plan that it says will remain in place for as long “the outlook for the labor market does not improve substantially.” Which begs the question: how much larger is the central bank’s $2.9 trillion balance sheet likely to get?