The president of the Federal Reserve Bank of New York on Friday all but called for the Fed to resume large-scale purchases of long-term government bonds, solidifying a growing conviction on Wall Street that the central bank will do just that, starting in November, reports NYT.
“Viewed through the lens of the Federal Reserve’s dual mandate — the pursuit of the highest level of employment consistent with price stability, the current situation is wholly unsatisfactory,” the president, William C. Dudley, said in a speech to the Society of American Business Editors and Writers in Midtown Manhattan.
The fact that Dudley specifically called for the purchase of long-term bonds suggests that he may be clueless as to how interest on excess reserves has slowed monetary growth. He seems to be talking in a paradigm that existed before Bernanke introduced all his new monetary tools.
Bottom line: Bernanke can run circles around this Fed prez. It's possible for Bernanke to even buy long-term bonds to appease Dudley, but drain in other ways to prevent any significant money growth. The ball remains on Bernanke's side of the court.
This can't be the very same William C. Dudley who worked at Goldman Sachs from 1986 to 2007. Can it?
ReplyDeleteIt sure is.
ReplyDeleteI'll paraphrase: "Viewed through the lens of the Federal Reserve’s dual mandate — the pursuit of this madeup nebulous thing consistent with this other madeup nebulous thing, the current situation is wholly unsatisfactory,”
ReplyDelete