The WSJ’s Hilsenrath writes that SF Fed Williams wasn’t too worried about last week’s soft NFP report:
We just have to get away from overreacting to one piece of data
And is sticking to his earlier judgement that tapering might be appropriate in H2’13.
Mr. Williams stuck to his stance in the interview. “We’ve got a very strong accommodative policy in place, and I am very happy with that,” Mr. Williams said in the interview. Still Mr. Williams said he expected to see enough improvement in the economy in the months ahead to warrant winding the programs down. The programs, he said, must eventually “come to an end,” and he expects the economy to get on a better trajectory.
Of course, his forecast is conditional on how the economy actually performs. “We just have to keep watching all of the economic indicators,” he said.
I must be missing something here. Isn’t the US at 7.7% UnN? Which is a long way from 6.5%. I understand the Fed won’t want to end QE and start hiking rates immediately after, but I don’t think it serves any useful purpose to publicly discuss ‘tapering’ so early. The balance of risks strongly favours tightening too late rather than too early and most central banks under these conditions (Fed 1937, BoJ 2001, 2006, ECB 2011) end up tightening too early.
I agree. Expectations are the key tool, so communications matter. This is unhelpful. In my view, Bernanke will leave in 2014 having only eased since the crisis started.
Comments are closed.