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FOMC Minutes: Support is growing for additional action "fairly soon," unless there is clear...

FOMC Minutes: Support is growing for additional action "fairly soon," unless there is clear strengthening of the economic recovery. QE3 is among possible actions, but other options discussed included extending the announced period of ZIRP, or reducing interest rates on reserves.
Comments (23)
  • leokaplin
    , contributor
    Comments (202) | Send Message
     
    not this year.
    22 Aug 2012, 02:10 PM Reply Like
  • Whitehawk
    , contributor
    Comments (3129) | Send Message
     
    Talk keeps the hopium alive...Gold and the EUR popped, then proceeded to fall off again....
    22 Aug 2012, 02:15 PM Reply Like
  • GaltMachine
    , contributor
    Comments (1464) | Send Message
     
    "raising interest rates on reserves"

     

    I don't understand this point. This would be a tightening as banks would hold even larger reserves and get rewarded for it. Reducing interest rates on reserves might force banks to lend more, otherwise this is just another stealth bailout of the banks.

     

    Please correct me if I am wrong on this as I must be missing something.
    22 Aug 2012, 02:17 PM Reply Like
  • whidbey
    , contributor
    Comments (3398) | Send Message
     
    Con game. There is probably little the FED can do but offer tea and sympathy.
    What matters is that the market says it wants/needs stimulus to hang-on, yet it rallies into the retreat date - what are they expecting from the FED to offer? Irrational.
    22 Aug 2012, 02:51 PM Reply Like
  • Whitehawk
    , contributor
    Comments (3129) | Send Message
     
    "Some participants commented on other possible tools for adding policy accommodation, including a reduction in the interest rate paid on required and excess reserve balances. While a couple of participants favored such a reduction, several others raised concerns about possible adverse effects on money markets. It was noted that the ECB’s recent cut in its deposit rate to zero provided an opportunity to learn more about the possible consequences for market functioning of such a move. In light of the Bank of England’s Funding for Lending Scheme, a couple of participants expressed interest in exploring possible programs aimed at encouraging bank lending to households and firms, although the importance of institutional differences between the two countries was noted."

     

    ***See my other comments below.
    22 Aug 2012, 03:03 PM Reply Like
  • klarsolo
    , contributor
    Comments (706) | Send Message
     
    It is saying "reducing interest rates on reserves"
    22 Aug 2012, 03:24 PM Reply Like
  • GaltMachine
    , contributor
    Comments (1464) | Send Message
     
    klarsolo,

     

    This is what happens when the SA people change the comment without showing it as an "update/edit". I wasn't the only one originally confused by this.

     

    I guess the editor caught their mistake because my excerpt was a direct quote from the blurb :)
    22 Aug 2012, 04:14 PM Reply Like
  • klarsolo
    , contributor
    Comments (706) | Send Message
     
    I was thinking that that may have been the case...wouldn't be the first time
    22 Aug 2012, 04:24 PM Reply Like
  • Remyngton
    , contributor
    Comments (354) | Send Message
     
    nagannahappen
    22 Aug 2012, 02:22 PM Reply Like
  • VictorHAustin
    , contributor
    Comments (827) | Send Message
     
    The Fed will bend over backward to avoid appearance of influencing the election. At least they always have. I realize lots of long standing principles seem to be out the window now.

     

    However, I think we need to stop all this "stimulus". It is just mortgaging the future, with a very high carrying cost.

     

    The unintended consequences abound. We have cut our mainstream retirees off at the knees by eliminating their CD incomes. We have a whole generation coming up that has no knowledge or experience of saving or earning on money. The money-printing implied tax falls uniformly on every dollar and is therefore nothing but a horribly regressive tax on the poor. We thereby drive them deeper into an under the table economy and destroy respect for law and order. We have undermined all depositors and instead give the banks free money and let them keep the interest. It's no wonder their executives pay themselves staggering bonuses. It's a cross-class wealth transfer.

     

    There are many more, of course.

     

    The government needs to get over its arrogant attitude that only it knows how to manage anything, especially since it is particularly poor at management. Reactionary actions are by definition 180 degrees out of phase with the system, so they alternately act as runaway amplifiers and as drains on resources.

     

    Nobody has stood up and said (or admitted) that ONLY the American People can bail the government out of this fine mess they have made, and only if they stop pushing and pulling and being "creative."
    22 Aug 2012, 02:23 PM Reply Like
  • ssmith90
    , contributor
    Comments (45) | Send Message
     
    thats what i was thinking, Galt. ZIRP is zero intrest rate policy i think, which would make sense.
    -next stop: negative intrest rate policy !
    22 Aug 2012, 02:23 PM Reply Like
  • Joe Razorback
    , contributor
    Comments (281) | Send Message
     
    The market cant figure out what to do with this statement.. Vix sunk, popped and is hovering... All major indxes did the same. I bet we get a mini rally about 3:45PM when the all thats left in the market are trade bots
    22 Aug 2012, 02:24 PM Reply Like
  • Herr Hansa
    , contributor
    Comments (3084) | Send Message
     
    Finally, they are discussing IOER. If they just did that, and no new QE program, I think we should see some increase in financial activity. I would still expect some constraints, due to upcoming Basel III rules. So possibility of slow growth. What happens with the ECB may become more important.
    22 Aug 2012, 02:24 PM Reply Like
  • Whitehawk
    , contributor
    Comments (3129) | Send Message
     
    "Anecdotal reports suggested that the decrease in shorter-term yields may also have reflected somewhat increased expectations that the Federal Reserve would reduce the interest rate paid on reserve balances in coming months."

     

    ...and now for some real FedSpeak:

     

    "“The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. To further its long-run objectives, the Committee seeks conditions in reserve markets consistent with federal funds trading in a range from 0 to 1⁄4 percent. The Committee directs the Desk to continue the maturity extension program it announced in June to purchase Treasury securities with remaining maturities of 6 years to 30 years with a total face value of about $267 billion by the end of December 2012, and to sell or redeem Treasury securities with remaining maturities of approximately 3 years or less with a total face value of about $267 billion. For the duration of this program, the Committee directs the Desk to suspend its current policy of rolling over maturing Treasury securities into new issues. The Committee directs the Desk to maintain its existing policy of reinvesting principal payments on all agency debt and agency mortgage-backed securities in the System Open Market Account in agency mort- gage-backed securities. These actions should maintain the total face value of domestic securities at approximately $2.6 trillion. The Committee directs the Desk to engage in dollar roll transactions as necessary to facilitate settlement of the Federal Reserve’s agency MBS transactions. The System Open Market Account Manager and the Secretary will keep the Committee informed of ongoing developments regarding the System’s balance sheet that could affect the attainment over time of the Committee’s objectives of maximum employment and price stability.”

     

    ***The problem is that the Fed's actions on interest rates and reserves do not have completely predictable outcomes. If they did, we'd have a "perfect economy" completely controllable by the central register. Economies include a vast array of participants that can react unpredictably to "exogenous" events.
    22 Aug 2012, 02:39 PM Reply Like
  • Herr Hansa
    , contributor
    Comments (3084) | Send Message
     
    The target for MBS for the Federal Reserve would be to attempt to prop up the housing sector.
    22 Aug 2012, 02:49 PM Reply Like
  • Whitehawk
    , contributor
    Comments (3129) | Send Message
     
    This is not new news. The Fed has stated for almost a year their position on MBS, yet the media consistently interprets it as new policy. Yes, they are propping up the housing sector (little news there) and MBS market. When they start having auctions of their MBS portfolio that don't fail...
    22 Aug 2012, 02:55 PM Reply Like
  • Herr Hansa
    , contributor
    Comments (3084) | Send Message
     
    Agreed. At some point they will distort the market. My feeling is that Operation Twist is already indicating that distortion with a break-down in the market for Treasuries. Need a couple more weeks of data to confirm that.
    22 Aug 2012, 02:59 PM Reply Like
  • realornot
    , contributor
    Comments (1281) | Send Message
     
    QE3 is among possible economic suicidal actions
    22 Aug 2012, 03:09 PM Reply Like
  • robbieboggie
    , contributor
    Comments (396) | Send Message
     
    Don't worry the market will continue upwards (printing press put) until it all collapses again one day. The central bankers have learned from John Law. There is no such thing as "the economy". The stock market is the economy. Everything is driven by this. If the market goes up - all the problems disappear, at least temporarily.
    22 Aug 2012, 03:14 PM Reply Like
  • The Last Boomer
    , contributor
    Comments (996) | Send Message
     
    Some people have argued that the market has moved up on fundamentals, not QE expectations but today's move at 2 pm defies this. It looks like it is mostly about the Fed, not about P/E stuff.
    22 Aug 2012, 08:46 PM Reply Like
  • aarc
    , contributor
    Comments (2748) | Send Message
     
    This is how I interpret the QE implementations:

     

    QE1 = executed late 2008 to PREVENT the US economy from going into a Depression or Great Depression;

     

    QE2 = promised in August and implemented Oct. 2010 to STABILIZE the US economy as the possibility of a Double Dip a.k.a. Great Recession Part II became more entrenched in the market psychology as the European Dept Crisis rages at that time;

     

    QE3 = to achieve SUSTAINABLE GROWTH as more recent data point to deteriorating economic growth conditions.

     

    The Fed actions, so far, are basically progressively understandable in the context of what should and must happen given the sequence of events that had happened in the past and the present economic conditions.

     

    * For those who are not making money or have lost in the stock markets and are leery of how the QEs benefited the current stock markets' rally (without them of course). That's their mistake through their own actions or in-actions. Not the Fed's fault.
    22 Aug 2012, 09:28 PM Reply Like
  • sethmcs
    , contributor
    Comments (3446) | Send Message
     
    If the fed does QE3 under today's conditions I am going to send all my money to Norway.
    22 Aug 2012, 10:41 PM Reply Like
  • Remyngton
    , contributor
    Comments (354) | Send Message
     
    giving a machine gun to a monkey
    7 Sep 2012, 03:17 PM Reply Like
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