Bullard Needs to See More Data
“The Fed needs to see more data on macroeconomic performance for the second half of 2013 before making a judgment” Federal Reserve Bank of St. Louis President James Bullard’s pretty vacant explanation about the pace of its $85 billion-per-month program of bond buying.
After talking taper for months it should now be clear what we have been saying here for months- the Fed has no exit strategy. See the Smaulgld.com string of articles tagged Fed exit strategy. The Fed likes to talk taper but print paper and they don’t know how to stop.
The delicious irony in all this latest back peddling from tapering is the rationale given: “we need to see more data”! The Fed has five years of data that decisively shows they have been printing money with no discernible positive impact on the economy despite the incessant wishful thinking and Keynesian cheerleading.
The Fed is stuck and they know it. Federal Reserve Chairman Ben Bernanke himself admitted that the economy is weak and would “tank” if interest rates went higher. Rates have been heading higher, not because of an improving economy but because of all this taper talk. Imagine how high rates will rise if they actually stop buying treasuries.
Without the Fed’s purchases of US Treasuries, demand would dry up driving the price of the bonds down and the yields soaring while also dragging down the stock and real estate markets-precisely the markets the Fed intended to inflate.
There’s just not enough inflation.
Fed loses Credibility if it doesn’t hit its inflation target
(but somehow has credibiity if it keeps bluffing about tapering)