Fed’s words may speak louder than actions now or not?

December 15, 2008 by · Leave a Comment
Filed under: Opinion 

I think not, with the Federal Reserve basically in a zero-interest rate environment and the U.S. is losing jobs left and right and that violates one of their mandates to promote full employment.  Their words are meaning less and less each day because they do not have any tools that will fix our situation.  

They can bailout bad companies and print money but that does not create long-term jobs or helps get consistent money into the lower and middle class so they can consume goods and keep businesses from failing.  The Fed has no credibility with the public and we are going to take the same course in the end regardless of their action.  .02


This time the Federal Reserve’s words may say more than its actions.  The Federal Open Market Committee meets today and tomorrow and will debate cutting interest rates yet again — a given at this point, considering the dire condition of the U.S. economy. What the FOMC says in the statement it issues after the meeting will be paramount.

The U.S. economy is plunging into a serious recession, with bank lending caught in a vise and the Fed’s target for the overnight lending rate at only 1 percent. The FOMC is likely to cut the target in half tomorrow, though overnight funds already have been trading not far above zero. That means a lower target won’t provide much additional stimulus.

At a minimum, the FOMC statement should acknowledge what everyone already knows — we’re in a recession and there’s a risk it will extend well into next year.

After its last meeting, on Oct. 28-29, the committee said it “will act as needed to promote sustainable economic growth and price stability.” Tomorrow it should make it clear that in the current context, promoting price stability means avoiding deflation.     

Source: Bloomberg


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