Markets Focused
on the Wrong Target
Euro Pacific Capital's John Browne relates how economic commentators & financial markets have focused excessively on the Federal Reserve's quantitative easing (QE) policy as the market's main driver .. however a recent report at the Federal Reserve calls this devotion into question .. The report illustrates that the entire QE program has been a costly failure .. the report's authors conclude that "Forward Guidance" is far more important in keeping the economy on an even keel .. The report estimated a conventional temporary lowering of the Federal Funds rate by just 0.25 percent points is more effective .. "While the Fed is trying to tell the markets that they don't need QE, the markets are screaming even louder that they do .. If we can believe that the Fed reads its own research reports, it is perhaps true that the Fed may soon try to taper down its monthly asset purchases. If this does happen, however, look for some other confidence boosting program to take its place. Is it possible that "negative interest rates" could be the next lullaby to quiet the frightened masses?"
LINK HERE to the essay
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