Fed Launches New Bond-Buying Program
FBN's Fed panel reacts to the Federal Reserve’s decision.
- Duration 6:29
- Date Dec 12, 2012
FBN's Fed panel reacts to the Federal Reserve’s decision.
Also in this playlist...
This transcript is automatically generated
Flopping down now up 27 let's go to Gerald -- -- -- I heard one specific I had heard before they said we'll start wobbling back on quantitative easing the Fed will.
When unemployment now at around seven point 82 point 9% hit six point 5% is that a good thing or bad thing.
And I think it's terrible thing but they've been itching to this for some time targeting something that don't actually controlling only the unemployment rate.
So it creates all sorts of of expectations that ultimately can't be met why -- terrible well.
Because they're targeting something they can't control they can over the long -- control.
Inflation within a band but they can't control the unemployment rate the other thing is some more along the way.
2% which used to be the ceiling has now become the floor and I think you take that and the targeting of the unemployment rate and they really saying exactly what Mervyn King worried about they're going to pursue a beggar thy neighbor policy through cheap dollar.
You know just -- -- -- -- -- of this of course -- senior economist -- paid right -- one of the things that again saying on -- six point 5% threshold and again -- -- -- we didn't expect to get today we got at what felt -- what what about the use X -- all of -- and that is what people are leaving.
The workforce I mean -- -- at the Fed.
Doesn't is not back to that and -- gonna get a -- reading -- what their view of unemployment as if you're sitting at six point 5% fine.
But the U six rate is still incredibly higher.
While they've just taken one problem and replaced with another -- up to this point market participants like ourselves -- -- -- day.
Mig 2050 -- what does that mean can that moves and we've seen that -- several times today they pushed that aside and said okay we're gonna be easy.
Putting its annual buying bonds and -- to get six and a half on the unemployment rate right you question the market is immediately can ask is okay.
-- what the labor force participation rate stays at depressed levels and we get to six and half percent.
Are you still gonna use that as your quote unquote living off -- it adds a new set of questions.
And I agree with -- this this is not the solution here you just sit back and -- what they're doing.
They're gonna buy more bonds until the unemployment rate falls and I still can't figure out the connection between buying bonds.
And the unemployment rate they can't move that that type -- the apnea -- On the ballot but that's constant -- we are Gerald Driscoll say that it's terrible.
That the Fed is now today will start crawling back when a book on plummeted six point 5% I thought it gave us an end in sight of those optimistic thing what do you think.
Well as -- this is the -- Levin's role Charles Evans from the from the Chicago -- the one that's been putting this forward and it's been it's been out there for awhile.
And there's a couple things I think about this 16 point 5% is interesting because the natural rate of unemployment had fallen.
Back to -- -- between five point five and six.
So while they haven't said it explicitly I wonder if this means the natural rate of employment has gone up -- the natural rate at that rate at which you get the inflection point.
Where inflation starts to kick and I saw that two months ago you we saw that may be that thinking -- long term unemployment is going after higher yeah it.
So that takes into account the participation rate aspects to some extent.
But again if we're targeting if they're targeting housing here and housing is the transmission mechanism.
This is where you get the highest multiplier.
This is where you do actually have some feedback into better employment and one thing that how the company is it really is in the -- topic but let's think about some positive sort money thirteen.
We have an oil and gas -- that's happening here almost in spite of ourselves.
And if you look over the next four years you're looking at adding two million jobs from that.
That also has multiply her facts so I think it could it we could be looking at the end of 2013.
Beginning of 2014 when they're talking about tightening and that actually is whatever it would all the other commentators want it right so we're not looking at the end of 2015 anymore it's six point five environment -- It's early appointments signal about -- to take this to -- and I get your former advisor at the -- means she's bringing up a good point about that -- -- -- 5% but again.
From everything that we're seeing in the economy right now from everything that we're hearing and reading in -- statement right now 2015 is probably going to be too far off.
I don't think so I think actually all they've done is -- converted -- calendar date.
Threshold of 2015.
Into an unemployment rate threshold.
Their forecast for where the unemployment rate would be in 2015.
When they last -- forecast in September.
Was that it would be in about the range of six and a half percent so I think this really doesn't change the -- with the Fed about when they're gonna start tightening made simply change the language about what they're going to be looking at.
And yet James later Paul as a general -- Driscoll -- out the Fed can't.
Really control unemployment -- all -- -- your strategy to a number that you have no control over.
Well I you know I I like what mr.
Driscoll says but I am not sure I buy that argument because the only thing the Fed controls is is interest rates it doesn't include a control inflation either -- -- derivative function.
But I I wanna go back to what Constance and the other commentator mentioned which is that six and a half percent.
Will probably be reached well before 2015.
And has added evidence to that if you go back six weeks ago.
When Charles Evans was the guy whose name was attached to this 7% was the threshold that was being discussed the reason it's gone down to six and a half percent is because of the seemingly quick improvement in the labor market so.
I think this is the Fed sort of back -- way out of this mess that it's created.
Instead of sticking with 2015 they'll be out earlier -- responded -- really quick -- fiscal.
All well I eight I agreed that good that they're converting it to what they're really looking at which is the unemployment rate.
And -- last forecast said about 2015 so I I we're speculating what's going on -- mind.
But I think that they are actually now being honest about what they're targeting.
And -- they've been -- to that and now at least it's out in the open.
I got but yet the number right there -- I get by Howard Scott Markus got you did see dollar destruction today -- there dance.
Yeah it's their -- -- -- vs the yen mid bank of Japan's putting money like it's going out of style TO so.
They're currency's getting hurt.
I would good track record here I mean if you look at this bad guys and you look at their history in predicting economic growth.
Talking about interest rates talking about inflation the track records lousy said the fact that they're actually predicting that six point 5% it's gonna be -- when he fifteen.
Is not very likely to me.
All right thanks to everybody a great all star panel today we appreciate all of your time all of your reaction.
To what we have seen from the fat again it hits against her 25%.
Point 25% anyway thanks to all of you now -- got.