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Not sleeping August data -- because the Fed Joost us all love the Fed released its FOMC meeting just minutes just a couple of hours ago.
What do they really talk about at the July 31 -- first meeting showing that members actively discuss the possibility of yet another round.
Of so called quantitative easing so now everybody wants to know is the Fed going to decide to print more money at its upcoming meeting.
We found -- economists who says that Fed's actions hinge on just one economic report Carl Rica -- is senior US economist for Deutsche Bank he joins us.
Now -- great to see -- so first of all day.
You know these are notes that that reflect the thinking of three weeks ago they're not the immediate thinking.
And since those since those notes were made we've had a better than expected jobs report we've had better than expected retail sales.
So might that not put more of a damper on QE3 than these notes indicate.
That that certainly is the risk top policymakers -- so we're going into this meeting without debt the last employment report which was really one of the first data points others started to show evidence that the economy re gaining traction in the second half of the year.
In fact over the last three years we've seen the second half outperform the first half.
-- and it looks like this year is shaping up -- in a similar fashion so as you mentioned at the stronger jobs report retail sales surprise.
Industrial production surprised to the upside.
So what potentially some of those policy makers who thought that things were getting worse and worse at the time.
The meeting may now be sitting back and saying now wait a second that may do we don't need to pull the trigger.
On additional accommodation and there's an important distinction to make in the minutes which I think a lot of folks are missing.
The fact that the Fed minutes said that that many members saw the need for additional monetary accommodation.
Monetary accommodation does not necessarily.
Imply quantitative easing balance sheet expansion money printing whatever you wanna call -- In the Fed's mind monetary accommodation could involve other measures.
-- things like extending the language guidance on nod their eventual exit so.
Up or for instance -- right now the Fed's indicating that they'll be on hold out what the Fed Funds rate.
At that effectively zero through late 2014.
Not that could potentially push that out at the September meeting to mid 2015.
Late 2015 even 2016 or they could tie it into economic conditions -- we won't accept the current Fed Funds -- As long as inflation is near 2% in the unemployment rate is still elevated so in their minds that -- also count does monetary accommodation.
So I think there's a bit of the mysteries here that folks think this means quantitative easing I don't think that's a foregone conclusion.
OK so there's that there is the decent data that David talked about that's happened since the three weeks ago meeting.
There is also something else on the calendar and that's the election and I don't we've had so many people on this program say.
The Fed does not want to politicize this and if they start to try and pour in more asset purchasing behavior.
More liquidation etc.
It liquidity rather keep QE than that it will look political in some way do you believe in your heart of hearts that we'll see it or not.
I I think that the Fed wants to avoid that that that political bias.
In their policy actions that being said if something happens.
And the economy is it the falling into a nosedive by that has an economic or financial crisis.
The Fed will not care -- there's an election.
And they will take action so.
-- the complication here is that they don't act at the September.
1213 fed meeting that they have to wait until the next meeting which -- late October less than two weeks ahead of the elections so I really do think the October meeting.
It's off the table at this point.
-- September it would be the opportunity if they don't -- in September -- they're forced to wait until mid December so there's a long sort of freeze period there but as you asked not to answer the question in my heart of hearts I do not believe.
That they will follow up with that additional quantitative easing in less.
The August employment report which we get on that first Friday of September.
Is a washout and by that I mean a sub 100000 number.
Gotcha -- -- quickly how do you get money out of the banks and into circulation and and into the pockets of -- businesses they can.
Build their businesses and hire more people.
You remove economic uncertainty if business and households are confident about the future they will be more likely to deploy.
Larry I'm we undertook -- because of grain Jane Scholl who used to be on the Fed keys has said to date couldn't be over and over again don't just remove that.
Remove the very accommodative lending purposes or park your money with us.
They give the banks such a good deal on basis points when it comes to that and so that banks figure -- let me just -- with the Fed instead of one thing.
Well it's not a very good deal when you look at -- inflation adjusted returns so we look at real interest rates it doesn't make all that much sense to park your money at the Fed in less you're really concerned about the economic outlook.
If you if you think that well maybe we'll muddle through war or even look for more bullish scenario -- you can get a much better return issuing loans to corporations creditworthy corporations -- to creditworthy households for mortgages or other types of consumer -- so really what we have to do with -- economic uncertainty and how do we do that.
Well the big issue -- -- horizon right now with this fiscal cliff coming up next year congress needs to do something to water down that fiscal cliff.
At the CBO report said earlier today if we do nothing about the fiscal cliff.
This will throw the economy into recession in the first quarter of next year.
If I'm a business manager and I know potentially a recession could be on the horizon if Washington doesn't act -- a good to be very hesitant to.
Either buy new equipment or hire new employees.
Carl Rica -- from -- back Carl good to see -- thank you very much you think you.