Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
Some interesting words from one of the ultra doves in the Fed, Boston’s Eric Rosengren – while not currently a voting member it is interesting to hear the fact these type of thoughts are discussed in their meetings. His suggestion is the Fed do QE until everything is back on track – and not set any limitation on the amount. Due to the limited efficacy for the real economy this might mean permanent QE for years upon years. Obviously not on the forefront but if you believe this economy has a case of serious structural issues that are years in the making to fix, this might be part of the discussion a year (or two) from now.
- Boston Fed Bank President Eric Rosengren said in interviews with the New York Times and CNBC that the Fed should start buying Treasury and mortgage-backed securities and continue doing so until the economy was back to full strength. “You continue to do it until it’s clear that you’re no longer treading water,” Rosengren told the New York Times. “You continue to do it until you have documented evidence that you’re getting growth in income and the unemployment rate consistent with your economic goals.”
- Rosengren is not a voter this year on the Fed’s policy-setting Federal Open Market Committee and is considered to be among the most outspoken “doves” who favor an activist approach to stimulating growth and bringing down the high unemployment rate.
- His suggestion that the Fed not place an upper limit to its bond buying represents a new line of thinking in the many unorthodox steps the U.S. central bank has taken since it exhausted its conventional tool — control over short-term interest rates. The Fed cut the benchmark federal funds rate to near zero in December 2008.
- Rosengren expressed confidence, however, that the approach would reap benefits. “There are a number of areas where quantitative easing can help,” he said. “One, it does push up asset prices. … A second area is the housing market,” he added. Stock market gains that have followed Fed quantitative easing announcements have increased consumption, he said.
Still pretty shocking to see a Federal Reserve official literally say out loud they are targeting asset prices, but over the past few years it has become commonplace.
Disclosure Notice
Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
