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Does the Fed Actually Want Inflation?

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    Payden & Rygel Senior Economist Jeff Cleveland on the impact of Federal Reserve policies.

  • Duration 4:19
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Federal Reserve Chairman Ben Bernanke did not drop any real clues about further action to help stimulate the economy this week that one economist says who cares they wouldn't do much at -- Where this fed is all about monetary threat policy Jeff Cleveland.

Is a senior -- that pavement right when he joins us -- good to -- -- -- -- let me first ask you about the good idea let me go above Bernanke's pay -- for the second the president the United States -- said today.

-- -- private sector is doing fine now do you agree with that.

I think they're doing.

Okay.

-- what it means exactly by fine and you look at private sector payrolls dated.

There's up about two million payroll increase over the last not you're so that's good.

And I don't know if it's great but it certainly moving in the right direction.

Moving in the right direction OK so let's talk about what you call.

That monetary threat policy can -- -- down and then kind of define what it is and and weathered the average investor out there.

Although none of our investors -- average we love them all but whether they should be paying real attention to this and how.

Yeah I think Bernanke's speech like you said there was lives there wasn't too many hinted there right but it was Janet Yellen speech on Wednesday evening.

Out in Boston she's the vice chair I think she -- it's a bit more detail now what the Fed for sure what the Fed could do.

Yeah and you know when when you really dig into that it comes down to a a couple of things really one is telling the market it may think.

Interest rates are gonna be lower for longer you know stretching out into let's say 2015.

Late when he -- -- -- -- sort of a threat if you will keep rates low.

Obviously they do is threatened to go out and buy more -- liquidity and the Fed stepped in and buys buys more bonds.

At least fewer bonds for investors to buy the idea being that you're gonna have to go look elsewhere gonna have to look and other sectors.

Or that equities and so -- -- sort of like a threat.

That they might do it -- that they do it it's it hasn't some sort of impact on expectations.

For investors but I don't.

Michael what have they really don't want -- -- I'm tired talking about the Fed now I mean.

Rates are down that they're not gonna get much lower and frankly lower rates haven't done much to stimulate house buying -- stimulate bank Lanny it's -- Is is it something more for example could it be that they really want a little bit of inflation in this economy.

Absolutely -- they want you instead of sitting in treasury bonds.

-- one point 6% in the in the yield or parking money in your bank account they want you to think the prices are gone up David and you need to buy things today.

His -- -- things today that -- I cannot listen I mean I know I know that some people say some producers want that some investors.

But that is playing with fire is a not a media that you think you can control inflation but once -- set it loose.

Very often it it gets away -- you you can't control.

That's exactly right -- you can ask.

I think on one hand David they've been doing a lot of this sort of activity the last two years right we haven't seen much inflation.

Headline measure of inflation probably next week we'll drop below 2% year on year.

-- that you get yourself how how credible is this threat is that had a real impact on inflation.

And I think yes the other great question how precise can -- be in tardiness in a specific inflation rate.

Jeff we have I don't know -- let me just jump in -- -- we only got about twenty seconds what we have a lot of CEOs who watch this what is the number one thing they need to be paying attention to were getting economic data over the weekend about China.

Some people believe that they cut those rates in advance of kind of try to smooth over some very bad news that may come out we're not sure.

And of course the Spanish banks may cry uncle and say we need we need capitalization now.

I think the most important thing and we talked to investors -- we've really try to drive this home there is not going to be in our opinion a quick.

Over the weekend fixed to the entire European crisis or anything with regard to the Chinese economy -- our long term structural issues.

I think Europe is going to be with us for the better part of this decade.

And China I think without doubt we can expect it's not necessarily crash but definitely slower growth -- need -- back today and it's not it's not a one quick.

Up -- from up monetary policy maker that's gonna change that.

Overnight or over the weekend Jeff Cleveland senior economist at -- America thank you very much for joining great analysis Jeff that was -- weekend.

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