federal reserve

Is the Fed's Quantitative Easing Pushing Up Home Prices?

Is the Federal Reserve's quantitative easing over inflating housing prices?  According to one Fed Official they aren't  Yet the Federal Reserve is buying 50% of mortgage backed securities, keeping mortgage interest rates at record lows and affecting pricing on mortgage backed securities themselves.


The Fed's Economic Projections and Bernanke Conference

The Federal Reserve FOMC released their updated economic projections and frankly they are weird.  GDP estimates were lowered yet the official unemployment rate projections were also lowered.  The rule of economic law is lower economic growth means less jobs and hires so how one can have subdued GDP with better unemployment figures is none too clear.

QE3 Addicts Scour FOMC Meeting Minutes Looking for Their Fix

Quantitative easing is the buying of various securities to increase the money supply. In a round about way, this increases liquidity at banks, stuffs them with capital, which theoretically banks are then supposed to turn around and increase lending to regular people.

The amount of text written on FOMC meeting minutes is astounding. This is a conversation from a meeting almost a month old where no action was taken. In a game of Where's Waldo, people pour over the words, hunting for even a trace of more quantitative easing. This time they found it and pounced.

Here is the latest FOMC meeting minutes phrase that has quantitative easing addicts salivating and foaming at the mouth.

Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery.

The problem, with this is taking comments out of context from meeting minutes. Some economic indicators improved after July 31st for one and the Fed is concerned about deterioration. Right after the above sentence is this:

Don't Let the Big Fat Zero for January 2012 Industrial Production Fool You

The Federal Reserve's Industrial Production & Capacity Utilization report, G.17, shows zero change in industrial production for January 2012. The culprit was utilities and the Fed blames the weather. Warming temperatures in winter cause home energy production to drop beyond their typical output levels. The big fat industrial production zero hides some very promising changes.

Sweet Nothings from the Federal Reserve FOMC Statement

So much for Helicopter Ben swooping in and enacting more quantitative easing. The FOMC statement tells us nothing we don't already know. Nor does the Fed have any more magic bullets. The economy sucks, we have a jobs crisis and about the only thing new is a mid-2013 end date for keeping interest rates extraordinarily low:

The Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent. The Committee currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.

There were three dissenters, out of 10, on the decision to guarantee a low federal funds for a two year time period, preferring no defined time window.

What one can gleam from this is the Federal Reserve now believes this economic malaise will continue for two more years. We've known that but now it's official, the Fed is acknowledging the long, protracted economic disaster which is the new normal of America.

The good news is the Fed at least acknowledges our terrible economy, although their previous GDP, unemployment and growth projections were much happy talk.