[ Follow Ups ] [ Post Followup ] [ Mosler dot ORG BBS ]
Posted by warren mosler (208.49.176.241) on 20:18:41 10/30/07
NEW YORK, Oct 30 (Reuters) - The following is a summary of recent comments by Fed policy-makers:
* Denotes 2007 voting member of the Federal Open Market Committee, which sets U.S. monetary policy.
THIS BEGINS WITH THE MOST RECENT, MY COMMENTS IN CAPS:
*FED BOARD GOVERNOR FREDERIC MISHKIN, OCT 26
"Although market functioning has certainly not yet returned to normal, and while it is still too early to judge their ultimate success, these actions, along with the policy easing decided at the September meeting, have helped improve conditions in several short-term funding markets."
MARKET FUNCTIONING IMPROVING. MY READ HAS BEEN THAT THE LAST CUT WAS TO PROMOTE 'MARKET FUNCTIONING' AND THAT WHILE 'GROWTH' MAY HAVE BEEN A CONTRIBUTING FACTOR, ESPECIALLY WITH THE THEN RECENT -4,000 JOBS NUMBER, IT WAS NOT SUFFICIENT FOR THE CUT.
*CHICAGO FED PRESIDENT CHARLES EVANS, OCT 22
"We cannot afford to be lax on the inflation front."
Still, risks remain that housing demand and prices "could weaken a good deal more than we expect," pulling consumer spending down as well, he said.
"If in fact the more likely scenario unfolds, in which conditions improve and risks recede, then policy should be prepared to respond to any developments that threaten the inflation outlook."
THIS IS CLEAR- 'FORWARD LOOKING' INFLATION IS PROBABLY FAR TOO HIGH FOR COMFORT, AND THE RECENT FOOD AND ENERGY SPIKE AND DOLLAR WEAKNESS SUPPORTS THIS RISK.
*FED BOARD GOVERNOR RANDALL KROSZNER, OCT 22
"In the months ahead, the Federal Reserve will continue to monitor developments in the financial markets and act as needed to support the effective functioning of these markets and to foster sustainable economic growth and price stability," Kroszner told the Institute of International Bankers.
AGAIN, ACTING TO SUPPORT MARKET FUNCTIONING, AND THEY ALL BELIEVE PRICE STABILITY IS A NECESSARY CONDITION FOR OPTIMAL LONG TERM GROWTH AND EMPLOYMENT.
*FED CHAIRMAN BEN BERNANKE, OCT 19
"Predictability is critical in building credibility. It is critical in reducing uncertainty, in making long-term interest rates respond in appropriate directions to Fed actions," he told a conference in St. Louis by satellite link during a panel discussion on making monetary policy under uncertainty.
"My idea of being predictable is on the one hand to use benchmarks ... but also to provide information to the public what our outlook is, what our forecast is, how we see the risks and how we plan to respond.
"That communication, and providing adequate information, is really the only way to be adequately predictable in a world of uncertainty," Bernanke said.
"Intuition suggests that stronger action by the central bank may be warranted to prevent particularly costly outcomes."
FIRST, THEY ALL KNOW THE MOST COSTLY OUTCOME IS THE 'INFLATION CAT GETTING OUT OF THE BAG.'
SECOND, IF THEY ACTUALLY WANTED TO BE PREDICTABLE THEY WOULD HAVE SIGNALED THEIR INTENTIONS A LOT MORE CLEARLY THAN THEY HAVE IN THIS COMPILATION OF ALL RECENT SPEECHES.
*ST LOUIS FED PRESIDENT BILL POOLE, OCT 19
"I think that, given the information set that we have, we are approximately in the right place," Poole told Reuters in an interview in St. Louis.
THIS IS ALMOST TWO WEEKS AGO AND HE THOUGHT WE WERE IN THE 'RIGHT PLACE' WHICH COULD MEAN THE FED FUNDS RATE. MARKET FUNCTIONING HAS NOT DETERIORATED SINCE GDP FORECASTS HAVE IMPROVED SINCE THE LATEST EXPORT STATISTICS WERE RELEASED.
"If I thought that we were way off the right place, what evidence would I offer? Well, I think the market would be looking at the same thing that I'm looking at, and then we wouldn't be there, we'd be in a different place," he said.
"If you are going to favor a cut, you are going to say, not only do I think a cut is appropriate now, but with high probability I'm not going to regret that decision," he said.
THE MARKETS HAVE SINCE FULLY PRICED A 25 CUT AND THE FED PROBABLY SEES THE FURTHER DOLLAR DECLINE AND INFLATION SPIKE A CONSEQUENCE OF THIS ANTICIPATION.
"I want to be sure that if I turn out to favor lower rates, which I might, I don't know where I stand on this...this is part of a regularity of policy behavior," he said.
"We are in a situation of unusual uncertainty because we have this market upset and we don't know how far along the healing process is...It is not exactly business as usual,"
'UNCERTAINTY' IS AT PERHAPS ITS ALL TIME HEIGHT. THE UNCERTAINTY IS A ABOUT 'MARKET FUNCTIONING' AND THAT'S WHAT WOULD BE BEHIND A CUT TOMORROW.
SINCE THIS SPEECH THE 'UNCERTAINTY' SEEMS TO NOT BE THE FOCUS OF THE SPEECHES AS IT WAS BEFORE THIS DATE.
PHILADELPHIA FED PRESIDENT CHARLES PLOSSER, OCT 18
"Simple rules may be useful, and could be useful in communication, in communicating key aspects about policy," Plosser told a conference sponsored by the St. Louis Fed on monetary policy-making under uncertainty.
"Behavior governed by simple rules is easier to monitor, it is easier to communicate and I think this contributes to an open and transparent way of conducting monetary policy."
SO WHY NOT TELL US MORE THAN THEY DO???
CLEVELAND FED PRESIDENT SANDRA PIANALTO, OCT 18
"The uncertainty around the outlook today is very high," Pianalto said during a question-and-answer session after addressing the Ohio Grantmakers Forum annual conference.
NOT 'UNCERTAINTY' EMPHASIS
"It's not clear how the financial market disruptions that we've seen are going to affect economic growth ... so ... we are waiting and learning," she said.
THE 'DISRUPTIONS' ARE THE ISSUE, THE CONCERN IS 'MARKET FUNCTIONING.'
*KANSAS CITY FED PRESIDENT THOMAS HOENIG, OCT 17
"The question that one asks is what are the implications for policy and the answer to that is obvious and is wait and see. Because it depends on how all these factors play out," Hoenig told a dinner audience in Tulsa.
"I'm optimistic, but I am also realistic and I want to stay alert as we move through this tender time," he said.
'THIS TENDER TIME' AGAIN IS ABOUT 'MARKET FUNCTIONING.'
"The U.S. economy has got a lot going for it. For example, the fact that we have already eased policy is a positive factor for the real economy. Secondly, the rest of the world is still growing strongly and demand for U.S. goods is strong.
"Consumers are still buying, unemployment is low, we are still adding jobs in a very dynamic U.S. economy," he said.
THE ECONOMY PER SE WASN'T THE ISSUE- BUT THE RISK THAT 'MARKET FUNCTIONING' MAY SHUT THINGS DOWN.
NEW YORK FED EXECUTIVE VICE PRESIDENT WILLIAM DUDLEY, OCT 17
On markets: "Clearly, the adjustment process is far from over ... That said, the situation does appear to have improved."
MARKET FUNCTIONING.
"But it undoubtedly will take time for circumstances to return to normal."
LATER SPEECHES INDICATE IT'S IMPROVED
On super SIV fund: "We do not have an official position but in general, the central bank is supportive to avoid a disorderly liquidation of assets."
MARKET FUNCTIONING, NOT THE ECONOMY PER SE
*FED CHAIRMAN BEN BERNANKE, OCT 15
"Conditions in financial markets have shown improvement since the worst of the storm in mid-August, but a full recovery of market functioning is likely to take time, and we may well see some setbacks," Bernanke told the New York Economic Club.
AS ABOVE.
"The ultimate implications of financial developments for the cost and availability of credit, and thus for the broader economy, remain uncertain," he said. "For now, the Federal Reserve will continue to watch the situation closely and will act as needed to support efficient market functioning and to foster sustainable economic growth and price stability." (To access stories on Fed policy click on [FED/AHEAD])
1. SUPPORT MARKET FUNCTIONING AS NEEDED
2. FOSTERING SUSTAINABLE ECON GROWTH MEANS FIRST SUSTAINING PRICE STABILITY.
THEY ALL AGREE THAT ITS FAR MORE COSTLY TO BRING DOWN INFLATION LATER THAN TO ALLOW A NEAR TERM RECESSION TO PREVENT INFLATION NOW.
COMMENTS WELCOME!
[ Follow Ups ] [ Post Followup ] [ Mosler dot ORG BBS ]