Will the Fed Act to Stimulate the Economy/Employment … in Time?
Not …. immediately…. but ….. maybe …. um…. ….. sometime …. soonish ….
Anyone counting on the Fed’s policy-making committee to begin another round of “quantitative easing” when it meets at the end of the month should keep in mind a few reasons for caution.
Fed officials were not expecting the unemployment rate to decline. They predicted last month that the rate would stand between 8 percent and 8.2 percent at the end of the year, and that still looks like a pretty good guess.
Furthermore, that bleak outlook has so far not roused them to action. The Fed’s policy-making committee did decide last month to extend a bond-buying program until the end of the year, but that was a placeholder intended to maintain that status quo, not improve it.
Finally, the closer we get to a presidential election, the greater the potential political advantages of lying low and waiting another few months. Yes, the Fed is a nonpartisan body insulated from political pressure. So is the Supreme Court. ...Binyamin Appelbaum, NYT
Exactly. Does this mean the Fed will turn up to save us stimulate employment in time to affect the vote in November around about Labor Day? Maybe.
On the other hand, the surest trigger for Fed action during this long crisis has been the fear of deflation. The central bank has consistently responded when the predicted pace of inflation droops too far below the 2 percent annual rate that officials consider most healthy. And one crucial measure of those expectations, known as the five-year break-even rate, now stands at 1.78 percent.
That is certainly lower than the central bank would like to see. But is it low enough to spur fresh action? …Binyamin Appelbaum, NYT
___
I think Floyd Norris gets it exactly right. Don’t blame Bush; just notice Obama is doing better.
… Looking at 12-month changes means you can ignore seasonal adjustments, so these are unadjusted figures. In June, the number of jobs was up 1.8 million from a year earlier, or 1.6 percent. The annual changes were a little higher in the winter, but the year-to-year change was the best for any June since 2006.
June is the month when the seasonal adjustments call for the largest upward adjustment in private sector jobs, as students find summer work. If there are fewer summer jobs than there used to be, we would expect the June seasonally adjusted numbers to be disappointing. They have been so in each of the last three years.
If that analysis is correct, the job numbers are likely to seem poor for the next two months, but to pick up with the September report on Oct. 5, and then to look impressive in the October report, which will appear on Nov. 2, four days before the election. ...Floyd Norris, NYT
Cross-posted from Prairie Weather
Share This
Obama needs to continue to pray Romney’s lack of charisma and poor choice of campaign advisors holds. It’s the only thing keeping him in office.
I believe today’s economy is worse than in 1992, when charismatic & savvy Bill Clinton took the White House from a sitting President.
What exactly is the Fed supposed to do at this point to help the economy? They can’t lower interest rates any more. They can’t force banks to loosen credit to small businesses and those looking to buy cars and homes. The only thing the fed can do at this point is raise rates to the point where massive funds can put money back into secure bonds at a reasonable rate of return rather than float trillions of dollars on risky credit default and derivative markets.
And at least in 1992 Clinton was able to take over from a GOP president who had the balls to raise taxes and at least try balance the budget. HW Bush was the last good GOP president.