The WSJ’s incomparable Hilsenrath reports that the weak August Jobs report makes further monetary easing at the Fed’s September meeting more likely.
According to Jon, the conversation at the Fed has now turned to how to ease – with an open ended programme now finding favour.
Officials have been leaning toward an open-ended bond-buying program in which the Fed holds open the possibility that it will continue to buy bonds after an initial allotment is purchased if the economy doesn’t pick up. They also have been leaning toward purchasing mortgage backed securities.
I wonder if the open ended-ness of the policy means that bonds won’t sell off following the announcement this time? Or does the expectations mechanism (inflation expectations rise as the Fed will keep at it) dominate?
I haven’t yet decided…