Federal Reserve officials have touted the ‘wealth effect’ from higher stock prices and rising home values as a key way in which monetary policy boosts consumer spending and economic activity. But according to the results of a recent survey from the Royal Bank of Canada, that ethereal feeling of being richer on paper is no substitute for cold, hard cash.
Is Federal Reserve Chairman Ben Bernanke avoiding the word “taper” in order to temper expectations that the U.S. central bank will ratchet down its massive bond buying program? This is one view that’s been widely bandied about in recent days.
MacroScope is pleased to announce the launch of ‘Ask the Economist,’ which will give our readers an opportunity to directly ask questions of top experts in the field. We are honored that Michael Bryan, senior economist at the Federal Reserve Bank of Atlanta, has agreed to be our first guest. In his role, Bryan is responsible for organizing the Atlanta Fed’s monetary policy process. He was previously a vice president of research at the Cleveland Fed.
These days, it seems, everyone is trying to keep up with shifting market expectations for the Federal Reserve’s monetary policies. CME Group’s Fed Watch, which delivers a snapshot of those expectations based on futures tied to the Fed’s target for short-term rates, is no exception.
Vincent Reinhart, a former top Federal Reserve researcher who is now chief U.S. economist at Morgan Stanley, believes the U.S. central bank will begin pulling back on the pace of asset purchases in December. Here’s how he arrives at that timeline:
Financial markets this will be keenly focused on congressional testimony from Fed Chairman Ben Bernanke and minutes from the central bank’s April 30-May 1 meeting, particularly given a thin data calendar. The latter may be the more interesting one, since it will offer hints into how far Fed officials are leaning in a direction of curbing the pace of its bond-buying stimulus, potentially late this summer.
Ann Saphir contributed to this post
Minneapolis Federal Reserve President Narayana Kocherlakota has gone from being one of the U.S. central bank’s more hawkish characters to arguably its most dovish. In line with this transformation, Kocherlakota told a conference sponsored by the University of Chicago’s Booth School of Business that the Fed, despite its extensive bond-buying over the last few years, has not done enough to spur growth.
In the barrage of Federal Reserve speakers making the rounds on Thursday, it is notable that San Francisco Fed President John Williams was the one that managed to move markets, allowing the dollar to recover losses. Why did his voice rise above the din? For one thing, he’s seen as a dovish-leaning centrist whose views closely resemble the Bernanke-Yellen core of the central bank.
Richard Fisher, the Dallas Fed’s outspoken president, is happy to be labeled a monetary policy hawk. After all, he sometimes quips, “doves are part of the pigeon family.” That may be so. But thus far, the doves have had the upper hand in the policy debate – and the economic data appear to bear them out.