Wednesday, September 17, 2014

Fed Says It Will Be ‘Considerable Time’ Before Rates Are Lifted

From the Fed statement:
 The Committee continues to anticipate, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored.

When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.
We have major inflationists at the helm of the Fed, though they are confused inflationists. I have been reporting in the EPJ Daily Alert that money supply growth is slowing. This is extremely likely to lead to problems in the economy sooner rather than later. Since Yellen has become chair of the Fed, I have not seen the words "money supply" mentioned in Fed minutes or monetary policy statements. The Fed has its foot to the pedal, but is not looking at the gas tank.


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