Wednesday, June 26, 2013

Lacker Says Fed Ready to Taper, Not Cut
Jeffrey Lacker (FRB-NY) is a non-voting member of the FOMC this year. Last September, he dissented from the FOMC’s decision to implement QE3. Today, in an interview with Bloomberg Television, he said he is "fine with us tapering it off right now." He explained, “This asset-purchase tapering is just slowing the rate at which we’re increasing the balance sheet. We’re not anywhere near decreasing the balance sheet yet.”

Lacker said Fed Chairman Ben Bernanke “did an excellent job” in his press conference last week, but he admitted that Fed communications have had a “rocky period over the last couple of months.” He added, “Markets got a little bit ahead of us in terms of what they were expecting. They’ve gotten into better alignment now with the committee’s expectations.”

Apparently, the members of the FOMC all have Bloomberg terminals in their offices and are very sensitive to the sensitivity of the financial markets to everything they have to say about monetary policy. Have the members and the markets developed an unhealthy co-dependency relationship?

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