Wednesday, November 2, 2011

No Changes in Fed Policy


Update: The Federal Reserve in a statement following its regularly scheduled Federal Open Market Committee meeting said that,"information received since the Federal Open Market Committee met in September indicates that economic growth strengthened somewhat in the third quarter, reflecting in part a reversal of the temporary factors that had weighed on growth earlier in the year. Nonetheless, recent indicators point to continuing weakness in overall labor market conditions, and the unemployment rate remains elevated...The Committee also decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013."

Bottom line: The Fed like most Keynesians and econometricians have no clue as to how the economy operates. There focus on trailing numbers leads them to be way behind the economy when it turns. Even given the fact that the turn is being manipulated by them!

Update 2: The FOMC statement also said that "The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee's dual mandate as the effects of past energy and other commodity price increases dissipate further."

It is quite amazing that the Fed, which is pumping money supply at near record rates, doesn't see the price inflation this will cause. Bizarrely, they expect inflation to settle. Are they going to be in for a surprise.

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