The Banking and Strategy Initiative

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FOMC January 2012: Meet the Press

Bernanke makes it clear that there is no change in its policy direction, “rather more transparency” per Longer term goals(both Unemployment and inflation), medium term outlook and assessment of risks

..2% goal for inflation

..Significant economic disturbances

..Longer rate of unemployment at 5.2% – 6% higher than afew years ago but same as last year

..thence highesr accomodative stance in monetary policy

Economic projections of the 17 ( % board and 12 Reserve Governors):

2012 Economic growth , 2.2 – 2.7% . unemployment 8.2-8.5%. inflation 1.4% – 1.8%

2013 2.8-3.2.%

2014: 3.3% – 4.0%                                                               6.2% – 6.7%               1.2% – 1.6%


Q and A

* We have been quite accomodative and we have extended that period to 2014 ( Our warnings are not dire, we have been scoring low on our unemployment target)

* Inflation is going to be low, unemployment is likely higher and with structural impediments, “labor market is obviously quite slack

* What is the view of the Chairman?

– We will be keeping rates low irrespective our projections are too pessimistic or too optimistic as we have identified

– chairmen might change, FOMC remains continuous, not dependent on a sngle individual

* Yes we treat unemployment and inflation symmetrically, meaning equal stress was deliberate

* Hostility from Republican candidates? (MW) I’ll stay here and not talk about hypothetical situations, lower rates also  impose costs on savers, “Savers in our economy have adequate avenues to earn adequate returns, lower rates are required to stimulate the economy to achieve employment and low inflation which will in turn bring higher returns to savers..”














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This entry was posted on January 25, 2012 by in Financial Markets.


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