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"Watch what (the Fed is) doing, not what (it) is saying," says Jim Grant, noting the Fed's...
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Thursday, June 7, 2012, 11:07 AM ET"Watch what (the Fed is) doing, not what (it) is saying," says Jim Grant, noting the Fed's balance sheet has been contracting at a 10% annualized rate. Unless the Fed keeps buying securities, the balance sheet will continue to shrink, i.e. doing nothing is equivalent to tightening policy. It's the best reason yet, Grant says, to expect additional QE.
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To suggest that this contraction is, now, somehow a clever ploy to set up more QE is simply unsupported by the Fed's (especially Bernanke's) words or actions and is more suggestive of the constant disbelief of some that the economy and markets can sustain themselves without some artificial mechanism supplied by the Fed.
The Fed is only going to act, again, in an expansionary manner if the economy shows definite signs of deteriorating into contraction, not just slower growth.