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Autopilot in Reverse: Fed Discusses Regular Use of QE in Non-Emergencies

Summary:
San Francisco Fed President admits open debate on permanent QE as a regular tool. Autopilot is in reverse gear. Seven Fed presidents gave speeches this week. San Francisco Fed president Mary Daly provided the closing yap for the week. “In the financial crisis, in the aftermath of that when we were trying to help the economy, we engaged in these quantitative easing policies, and an important question is, should those always be in the tool kit — should you always have those at your ready — or should you think about those are only tools you use when you really hit the zero lower bound and you have no other things you can do,” Daly told reporters after a talk at the Bay Area Council Economic Institute. “You could imagine executing policy with your interest rate as your primary tool and the

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San Francisco Fed President admits open debate on permanent QE as a regular tool. Autopilot is in reverse gear.

Seven Fed presidents gave speeches this week. San Francisco Fed president Mary Daly provided the closing yap for the week.

“In the financial crisis, in the aftermath of that when we were trying to help the economy, we engaged in these quantitative easing policies, and an important question is, should those always be in the tool kit — should you always have those at your ready — or should you think about those are only tools you use when you really hit the zero lower bound and you have no other things you can do,” Daly told reporters after a talk at the Bay Area Council Economic Institute.

“You could imagine executing policy with your interest rate as your primary tool and the balance sheet as a secondary tool, but one that you would use more readily,” she added. “That’s not decided yet, but it’s part of what we are discussing now.”

In Control Not

This discussion is further admission that

  1. The Fed is not in control
  2. The Fed seeks to manipulate and placate the markets

Any sensible person already understood that.

Autopilot In Reverse

In December, the Fed Chair Jerome Powell said the Fed was on "autopilot" for QE reduction. Following a market taper-tantrum, Powell reversed course.

Today, the truth comes out: If the market throws a tantrum, the Fed will listen.

Mike "Mish" Shedlock

Mike Shedlock
Mike Shedlock (Mish) is a registered investment advisor representative for SitkaPacific Capital Management (http://www.sitkapacific.com/). Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

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