Replies to post #162725 on Biotech Values

[DewDiligence]

Key paragraph in the FOMC’s statement:

...the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens.

In other words, the Fed is unlikely to raise interest rates until 2015 (at the earliest).

[bladerunner1717]

William Dudley seeks to undo some of the damage caused by Bernanke

You can expect more of this kind of talk in the next two weeks as seven Fed Governors are speaking. As Fed Governor James Bullard recently stated, Bernanke's timing was plain horrible and has spooked global markets.

Here's the crux of Dudley's analysis from a speech yesterday:

During and following financial crises, problems in the financial system can impair the transmission of monetary policy to the real economy. When this happens, policy may need to be more accommodative than otherwise in order to achieve its objectives.

The experiences of both Japan and United States are cases in point.5 In retrospect, we know that following the collapse of the property bubble and the investment boom in Japan in the 1990s, the Bank of Japan (BoJ) did not follow a sufficiently accommodative monetary policy to prevent deflation. Although the BoJ response was appropriate relative to the economic forecasts that prevailed at the time, those forecasts proved much too optimistic. Thus, policy was insufficiently accommodative with the benefit of hindsight. To a lesser degree, the same critique also applies to the United States. Despite an aggressive shift towards greater monetary policy accommodation in 2008 and 2009, and ongoing subsequent easing—which has supported a return to growth and helped to facilitate needed adjustments in housing and household balance sheets—the economic recovery has been consistently weaker than forecast. As a result, the Federal Reserve has fallen short of meeting its employment and inflation objectives. This suggests that with the benefit of hindsight, U.S. monetary policy, though aggressive by historic standards, was not sufficiently accommodative relative to the state of the economy.

This is Fedspeak for telling the Markets to calm down; the Fed will not be easing anytime soon.

The full text is here:

http://www.newyorkfed.org/newsevents/speeches/2013/dud130624.html


Bladerunner