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Former Dallas Fed chief economist Michael Cox, Raymond James chief investment strategist Jeff Saut and UBS economist Kevin Cummins on the Fed decision...
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There yet -- Wall Street will soon hear more from Fed Chairman Ben Bernanke on the new stimulus and a surprise move really to set the target for the unemployment rate.
What do they wanna hear let's bring in our all star -- -- Michael Cox former chief economist of the federal reserve bank of doubt.
Flat as -- you Cox school of business deaths out -- investment strategist at Raymond James.
And Kevin Cummings UBS economist and former analyst at the New York fed.
Boy I'm sure you guys have tons of opinions Michael -- -- start with you first though.
Most of it was expected what do you think about this notion of setting it though to a target unemployment rate.
That's very -- thing it's a really new policy change for the Fed.
I think there's very significant -- because the Fed really has to Wear two hats one half is that have a controlling inflation and the other one is providing.
Full employment and balanced growth and so on.
What they're saying is they're changing their target really away from unemployed -- -- for inflation to unemployment and in doing so what that means that you should expect.
A lot more stimulus all up you should expect -- inflation I think the -- to the trying to give themselves cover.
For creating substantially more inflation going above -- to 3% target range.
With so Jeff can we call this QE fool the -- actually did today is interest staying on the end of Operation Twist 45 billion dollars a month in not treasury purchases and then not selling short term treasuries.
To offset that offset those approaches are -- -- The balance sheet is just getting bigger and bigger and big what what do you think of this strategy.
I think it shows that Ben Bernanke is likely the most creative fed head of my lifetime I think he's actually done a pretty good job I think would mean a lot worse shape.
With the financial fiasco of 2008 you've -- Bernanke had not been there and I think it puts the wind at the back for equities.
You know Kevin you were at the Fed in.
My first thought when I heard that it was tied to unemployment is.
Well what people just leave it fuel leaving the workforce and then number getting that love is because tons of people are sitting home collecting welfare checks then -- Yeah -- it's -- it's a difficult situation in that.
In -- -- umpiring it is in the best engaged necessarily to tell you how the labor market still and so the Fed has added this qualitative.
-- -- as well now that they're going to be following broader labor market conditions and it depends on.
Inflation and inflation expectations and that's why I think that we -- as early as we did I mean I don't think anybody is really expecting it.
To be announced today it was pretty clear that officials were gold meaning in this direction but nobody announcement nobody really expected them.
To announce it today at today's meeting.
So Michael you know look okay about moral more money being pumped in the bank's reserves are getting bigger and bigger but what can be done to urge them to actually move this money through the system because -- -- -- they're gonna.
Put money aside for when rates stop to go up -- may not be for a while but nevertheless they are reluctant to pass this money on to consumers and businesses so.
What good does it do to continue to -- cheap money they're not passing it on.
Well the reason the banks aren't lending to several reasons what with the main one is that there's too many rules and regulations banks don't many cases don't even know the break and ruler -- -- the reluctant to make the loans in reserve for following up.
-- of excess reserves have gone from less than a tenth of a percent.
To 16% apple had we have -- -- thing like this since you know 1930s.
And so on -- excess reserves that are getting stuff there that the problems are of course access rules and regulations on banks.
But the fact the Fed has got to squarely and liquidity trap by keeping interest rates low so low so long ride -- lead there's nowhere but interest rates to go but up -- -- they're not loaning the money to live rates Dougal.
Yet it's kinda defeats the uptick -- is now you can't -- listen Michael Jeff and Kevin stay right there we're just moments away from Fed Chairman Ben minute.
