The Fed Must Now Manage Expectations VERY CAREFULLY If It Doesn’t Want to Trigger Another Crash

Tuesday, February 26, 2013
By Paul Martin

by Phoenix Capital Research
ZeroHedge.com
02/26/2013

The Fed has a HUGE problem on its hands.

Fed officials are well aware that stocks have become totally disconnected from reality. However, they cannot simply come out and discuss ending stimulus efforts outright because it would cause a market collapse. Remember, the single most important role for the Fed post-2008 is to maintain confidence in the system. So they cannot risk any explicit statement that they will be pulling the punchbowl.

Consequently, Fed officials have begun a careful process of managing down expectations regarding future stimulus.

Federal Reserve Bank of St. Louis President James Bullard gave remarks Thursday on “U.S. Monetary Policy: Easier Than You Think It Is,” at a special banking forum sponsored by Mississippi State University’s Department of Finance and Economics…

Bullard discussed four considerations for QE3 going forward. First, while substantial labor market improvement is a condition for ending the program, Bullard said that “the Committee could consider many different aspects of labor market performance when evaluating whether there has been ‘substantial improvement.’” These include the unemployment rate, employment, hours worked, and Job Openings and Labor Turnover Survey (JOLTS) data.

The Rest…HERE

Leave a Reply