The term ‘fiscal cliff’ has now safely transitioned from economic jargon to popular cliché. But how worried should Americans be about the growth-stunting mélange of expiring tax cuts and spending reductions set to begin kicking in at the start of next year?
Economists widely believe that if Congress fails to come to some sort of agreement on the budget, the U.S. economy would plunge into a deep recession. RBS economist Michelle Girard, however, thinks a recent pick up in U.S. economic activity could offset some of the cliff-related weakness.
Federal Reserve officials have been worried that their policy of ultra-low interest rates may be having less of an effect than usual because of a “broken transmission channel.” In plain English, this means the money hasn’t really been flowing smoothly from liquidity-flooded banks to would-be borrowers.
Economists at TD Securities argue banks have passed on less than half of their lower funding rates as reflected in yields on mortgage-backed securities onto consumers.
During a Q&A at the Brookings Institution last week, former Fed Vice Chairman Donald Kohn asked new board member Jeremy Stein, formerly a Harvard professor, about the impression that the Fed’s quantitative easing was only helping wealthy people who benefit most from rising stocks.
“How do you deal with this sense that the effects of policy aren’t being equitably felt in all parts of society,” asked Kohn, who worked at the Fed for four decades before stepping down in 2010, and is now a Brookings Fellow.
ROANOKE, Virginia (Reuters) – The Federal Reserve’s latest monetary stimulus risks unwanted inflation and will not do much for economic growth, Richmond Fed President Jeffrey Lacker said on Monday.
Lacker, an inflation hawk who has dissented at every policy meeting this year, said a troubled U.S. labor market was being dampened by factors outside the control of Fed officials.
WASHINGTON (Reuters) – Federal Reserve Chairman Ben Bernanke on Sunday denied the U.S. central bank’s highly stimulative monetary policy hurts emerging economies, saying stronger growth in the United States bolsters global prospects as well.
Bernanke has often defended Fed actions against domestic critics, who argue the policy of keeping interest rates near zero while ramping up asset purchases hurts savers and risks future inflation.
WASHINGTON (Reuters) – The Federal Reserve’s new round of monetary stimulus is unlikely to do much for economic growth without a damaging rise in inflation, Richmond Fed Bank President Jeffrey Lacker said on Friday.
Lacker, an inflation hawk and the lone dissenter on this year’s Federal Open Market Committee, said he opposed the announcement in September of an open-ended bond-buying program targeting $40 billion in mortgage securities per month.
Regional Federal Reserve Bank presidents who oppose quantitative easing have made little way in convincing the central bank’s dovish core. Apparently, not so on the cause célèbre of policymakers like Richard Fisher at the Dallas Fed, who have called for too big to fail banks to be broken up.
In a speech this week, Fed board governor and regulation czar Daniel Tarullo stopped short of calling for outright break-ups. But he did take the unprecedented step of backing size limitations on banks that would be linked to overall U.S. economic output.
WASHINGTON, Oct 11 (Reuters) – U.S. unemployment remains
“painfully high” while inflation is not an immediate concern,
giving the Federal Reserve plenty of reason to launch a new
stimulus last month, a top Fed official said on Thursday.
Jeremy Stein, in his first keynote speech since becoming a
Fed governor in May, said he strongly supported the U.S. central
bank’s decision to embark on a new, open-ended bond-buying
WASHINGTON (Reuters) – U.S. unemployment remains “painfully high” while inflation is not an immediate concern, giving the Federal Reserve plenty of reason to launch a new stimulus last month, a top Fed official said.
Jeremy Stein, in his first keynote speech since becoming a Fed governor in May, said he strongly supported the central bank’s decision to embark on a new, open-ended bond buying program.
WASHINGTON (Reuters) – The U.S. economic recovery continues to be hampered by spillover effects of the European crisis and a downtrodden housing market, Federal Reserve Vice Chair Janet Yellen said on Thursday.
Yellen, Fed Chairman Ben Bernanke’s influential no. 2 at the central bank’s board, said the world’s major economies were all slow to mend from the massive shock of the financial crisis and recession of 2007-2009.