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Will The Fed Unleash More Stimulus?

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  • Description

    Stifel Nicolaus managing director Jim DeMasi gives his outlook for the Fed.

  • Duration 4:42
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The call and more discouraging talk from the Fed today is Atlanta Federal Reserve Bank president Dennis Lockhart spoke.

The US economy has been and technical recovery.

Since the summer of 2009.

The recovery to date has been as seen we growth and persistently high unemployment.

By any number of measures the strength of the recovery has been.

And remains disappointing.

Weak and disappointing.

Is Flockhart suggesting the Fed should get a jump on QE3 joining me taste in to -- on whether -- -- There's a good chance more stimulus is around the corner and if so is it a good thing Jim -- kind of show.

Thanks for having me ask you about this -- comments because he tends to be hawkish meaning.

He tends to less favored tighter monetary policy cracks of the fact that he's not shutting the door frame I'm more accommodation is that telling your view.

You know I think the Fed has taken really extraordinary steps doesn't support.

Economic recovery over the past four years.

But when you look at monetary policy.

It's most effective when it's being complemented by pro growth regulatory and fiscal policies and today that's just not the case.

So in the context.

Regulatory and fiscal policy working at odds.

To monetary policy with the economy appearing to stabilize who -- core inflation really running at the Fed's target of around 2%.

The kids for additional quantitative easing just doesn't seem that compelling.

So -- we need to see more from the government.

-- the federal government needs administration policies that are in such debate right now at the election coming up.

I think it would be extremely helpful if the Fed was getting some support on the fiscal side on the regulatory side -- -- to give you one example replacing the fiscal -- at the end of the year with pro growth tax reform.

West.

Regulatory policies that are sensible in the context of economic growth.

I think those.

Those actions would go a long way to supporting.

What the Fed has been trying to do over the past four years and probably be much more stimulative -- the margin than any additional action that's effective today.

So you have to believe that the Fed chief Ben Bernanke realizes that he's commented on it many times of the last.

Couple meetings -- minutes that we've we've received.

So yet there's still this debate -- about whether or not we're going to get QE3 there's growing -- for people looking for the August the outcome of the August jobs reports make the final determination.

As it is it do you think that -- QE3 could be at all affected.

You know I think at the margin there there is some benefit that you would likely to see it would be relatively small I think in GDP terms.

And what we've seen over the past four years as the Fed -- comment and provided.

QE1 QE2 operations west.

The benefits -- tended to be three to six months in duration they quickly fade.

It's not sustainable and on the Fed finds itself in a position of having to do more.

And I think we would see the same sort of a pattern of -- of again itself.

While helpful somewhat at the margin is really not -- affects a lot of the structural problems that have kept this from being a stronger recovery really over the past.

Three years yet if you look at the bond market while I'm watching interest rates -- maybe you can create -- -- Jim.

Have had US interest rates been a little more volatile lately we saw that we have a -- about one point 84%.

Today is that in essence.

Reflective of what the expectation from the Fed is or is that just a reflection of what people think is going on in Europe and the risk emanating from.

Thank you San pretty good move and the long into the treasury -- the -- dissolved as you mentioned about forty basis points from the low that we saw.

In late July I think partly it's attributable to expectations for the Fed to provide some stimulus.

Partly it's attributable to.

Expectations for the ECB to reactivate it's bond purchase program and to bring down sovereign borrowing yields.

The economic data has been better of -- yeah it certainly suggesting that we've stabilized relative to the downward trend that was more evident in a second.

Quarter didn't think you so much relentless factors of -- -- they'll finish last not go ahead.

I I just think of all those factors are putting some upward pressure on long term rates.

Got checked our rights and I have a lot of phones ringing in the background their -- -- whistles and that's that's very near out of state -- extended out to get back -- there have been.

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