Here are several comments about the latest monetary policy statement from the U.S. Federal Reserve, released on Tuesday afternoon. The big issue in some of the coverage I've been reading relates to how committed the Fed is to further stimulate the economy in inventive ways.
Clearly, some observers (not to mention investors, who have driven stocks a little higher in afternoon trading) are confident that the statement opens the door to additional accommodation through more bond purchases. Whoo-hoo! But others lament the lack of action now. Read on.
Mark Thoma, at MoneyWatch: "A while back, Bernanke said the Fed wasn't sure what it should do, so at least now it is prepared, but for me that doesn't go far enough. The Fed appears to be waiting for significant bad news on either inflation or employment before it will consider further easing, but (1) we have a big employment problem now that needs to be addressed, so why wait? And (2) once the bad news arrives, it will be too late for the Fed to do much about it."
Free Exchange, The Economist: "The bottom line is that the Fed could and should do more and most observers - including those drafting the Fed statements - seem to acknowledge this. It's a shame that we'll have to wait two more months, at least, to see something done at last."
James Marple, senior economist, TD Securities: "By focusing on trends in inflation and recognizing that recent levels have moved below their implicit target, the Fed has signaled that inflation outcomes are likely to be the threshold that would move the Fed towards a second round of quantitative easing."
Ian Shepherdson, chief U.S. economist, High Frequency Economics: "Wow. This is a big change, and we are inclined to interpret this shift as setting the groundwork for [quantitative easing]part 2.
Calculated Risk: "Paving the way for QE2 ..."
Dawn Desjardins, assistant chief economist, Royal Bank of Canada: "[The Federal Reserve is]committed to "provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate." This means that in the absence of a return to a faster growth path exerting further downward pressure on the unemployment rate or increasing doubts about a turnaround and eventual increase in inflation, another round of quantitative easing cannot be ruled out. The statement also keeps the door open to implementing other policy tools if they are deemed more appropriate at the time."