Disagreement!!   Who wud have thunk it

Oh dear, oh dear  

Oh dear

–Further Mon Stimulus Unlikely To Result In Discernible Growth Imprvmnt

WASHINGTON (MNI) – Richmond Federal Reserve Bank President Jeffrey
Lacker Saturday warned that the aggressive stimulus measures announced
by the Fed Thursday are unlikely to result in a “discernible
improvement” in economic activity but is likley to cause an unwanted
rise in consumer prices.

In a statement laying the reasons behind his lone dissent against
the decision by the Fed’s policymaking Federal Open Market Committee,
Lacker argued that the FOMC’s plan to buy $40 billion in mortgage-backed
securities a month would “distort investment allocations and raise
interest rates for other borrowers.”

As for the committee’s extension of its forward guidance — on how
long interest rates will remain exceptionally low — to mid-2015, he
said “such an implied commitment to provide stimulus beyond the point at
which the recovery strengthens and growth increases would be
inconsistent with a balanced approach to the FOMC’s price stability and
maximum employment mandates.”

The following is the full text of Lacker’s statement:

The Federal Open Market Committee (FOMC) decided on September 13,
2012, to purchase additional agency mortgage-backed securities at a pace
of $40 billion per month. The Committee released a statement after the
meeting saying that it expects a highly accommodative stance of monetary
policy to remain appropriate for a considerable period after the
economic recovery strengthens, and that it currently anticipates that
exceptionally low levels for the federal funds rate are likely to be
warranted at least through mid-2015.

I dissented because I opposed additional asset purchases at this
time. Further monetary stimulus now is unlikely to result in a
discernible improvement in growth, but if it does, it’s also likely to
cause an unwanted increase in inflation.

Economic activity has been growing, on average, at a modest pace,
and inflation has been fluctuating around 2 percent, which the Committee
has identified as its inflation goal. Unemployment does remain high by
historical standards, but improvement in labor market conditions appears
to have been held back by real impediments that are beyond the capacity
of monetary policy to offset. In such circumstances, further monetary
stimulus runs the risk of raising inflation in a way that threatens the
stability of inflation expectations.

I also dissented because I disagreed with the characterization of
the time period over which the stance of monetary policy would be highly
accommodative and the federal funds rate would be exceptionally low. I
believe that such an implied commitment to provide stimulus beyond the
point at which the recovery strengthens and growth increases would be
inconsistent with a balanced approach to the FOMC’s price stability and
maximum employment mandates.

Finally, I strongly opposed purchasing additional agency
mortgage-backed securities. These purchases are intended to reduce
borrowing rates for conforming home mortgages. Such purchases, as
compared to purchases of an equivalent amount of U.S. Treasury
securities, distort investment allocations and raise interest rates for
other borrowers. Channeling the flow of credit to particular economic
sectors is an inappropriate role for the Federal Reserve. As stated in
the Joint Statement of the Department of Treasury and the Federal
Reserve on March 23, 2009, “Government decisions to influence the
allocation of credit are the province of the fiscal authorities.”

** MNI Washington Bureau: 202-371-2121 **

[TOPICS: M$U$$$,MMUFE$,MGU$$$,MFU$$$,M$$CR$]

‘Both EU officials said the most likely form of help Spain could seek was a precautionary credit line from the European Stability Mechanism’

USD/JPY bulls will be hoping this treasuries sell-off has legs.

According to Fan Jianping, chief economist at the State Informaton Centre.

WSJ article