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Wall Street Journal Chief Economics Correspondent Jon Hilsenrath on the outlook for Federal Reserve policies and its impact on the markets and jobs.
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Few if any journalists know the current workings of the Federal Reserve better than the Wall Street Journal's John hills and wrath on the cover of today's Wall Street Journal he lays out.
Why the Fed's likely to continue their bond buying -- money pretty going into 2013 in fact.
Early reporting of this story yesterday likely help boost a late market rally.
Here with more on the Fed and some of its internal discontent is John hills and -- John.
Congratulate the short to restrict piece by the way yes very much very -- -- -- -- of the stock market of course reacted to it yesterday stock market loves to hear that the Fed is gonna be.
More accommodating.
But rising stock values don't always lead to more employment which is the Fed mandate in fact sometimes.
A stock can do very well if they fire people because they think that they're downsizings -- so.
So how does -- how to rising stock markets fit into the mandate.
That the Fed has for lowering and you know unemployment.
Well so there's a few things that the Fed's trying to do -- one of which is boosting what they would say is asset values not just the value of stocks but also the values for instance of homes.
And they hope that by reducing asset values it makes people more willing to spend but there's other things that they're trying to do with these programs.
They're trying to lower interest rates and we see some benefits of that coming through right now.
Mortgage mortgage costs have come down a lot of people more people are refinancing now than -- 69 months ago.
And we've also seen company's refinancing a lot of their debt because their interest rates are coming down we're seeing a lot of companies.
Issuing long term bonds and retiring shorter term debt.
And shoring up their own finances so these are all the kinds of things that the Fed's trying to do with these policy.
Now of course the critics would say as far as housing is concerned hey look that.
They've been bringing down rates -- at historically low levels for the past three years and it's only been recently that housing is to get off because demand is beginning to increase.
Yet what we had a bubble in housing.
And it took a long time for that to work its way through this system.
And you know it's really what what's going on in the economy right now is really at the end of the -- being driven by.
The effects that bubble and working it through working its way through the economy all the Fed can do is smooth things out.
A little bit.
You know I think they're they're probably aware of that debt.
-- they think that maybe these programs are helping on the margin but there's still a lot of bigger economic forces.
This fiscal cliff being one item that they don't really think they they can overcome that John.
And our own we just had Sheila -- on who's a critic of the Fed I mean she's she's not a right wing ideologue by any stretch she she -- for Elizabeth Warren for gonna -- but she doesn't like the bad she thinks that it's creating.
Another Bobble by by -- yeah rates in December of course they meet again at.
The question whether they're gonna continue with Operation Twist -- -- where they buy these long term bonds and they don't have any short term bonds to trade forward anymore in their portfolio today.
Bottom line is in American continue that the purchases of long term bonds that -- be that they've been doing.
They're gonna have to do it by printing money which isn't gonna make critics of diplomats about your monetization of the debt right if they're I -- exactly -- yes that's monetization of the debt that's a definition of it.
It's not quite as it's close to it is close to -- it's not quite that because they're not buying it directly from the government.
They're buying it in secondary markets but guy that you know it's certainly has -- -- of that.
Mean and visit one of the reasons why it -- what the Fed is doing makes people really uncomfortable you know their response to all of this is that well we don't have inflation now people have been saying for three years the Fed was gonna cause inflation.
Most measures are around -- -- -- I gotta I gotta jump in because we only have ten seconds -- one of the people dissatisfied is Dallas fed president Richard Fisher.
-- -- as does his voice amount to anything in the Fed quickly.
There's a lot of dissent to the Fed it's one of the problems that -- -- -- Bernanke's had to overcome he's not the only one but -- there a lot of people displeased with what they're doing.
Even inside the Central Bank.
And that's one of the -- as we should -- he's no longer voting members who member of the Fed but he does have been closer John hills and -- -- -- tremendous influence in the economy show that -- his feast day thanks John good to see you thanks a lot always great to have John on the show let's.
