Fed’s strategy and what to think about it

I have had the opportunity to discuss with some of my blog readers on what I said on the Fed’s monetary policy and what was said in the last press release (see here).  

There are two points to keep in mind

The message from the Fed is that all options are opened and if there is an opportunity in September the FOMC will catch it. It will be mainly dependent  on the next two labor market reports. It would reflect the fact that the US  central bank would like to gain degrees of freedom in the management of its policy.

The other point is that, except to regain control, there are no reasons to see the Fed hiking its interest rates rapidly. The US economy is not doing that well. GDP trend is just 2.1% at annual rate and inflation rate remains low.
My personal point is that, as the US dollar is expensive, there is no need to change monetary policy rapidly. Moreover I’m not sure that the business cycle is still expanding. (See here)

In analysing the Fed’s behavior we have to disentangle between what we perceive from the Fed and what we think the FOMC has to do. For me there is no ambiguity: the Fed will catch an opportunity in September if it can but I’m not sure that it is the best strategy for the US economy. 

4 thoughts on “Fed’s strategy and what to think about it

  1. Pingback: Sur la stratégie de la Fed et ce que l’on peut en penser | Le Blog de Philippe Waechter

  2. Pingback: Inquiétudes et ajustements à court terme pour l’économie globale | Le Blog de Philippe Waechter

  3. Pingback: Uncertainty and adjustment on markets | Philippe Waechter's blog

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s