The Federal Reserve's new and improved transparency
The Fed met today to discuss possible further reforms. But how will the new kinder, gentler and allegedly more transparent Fed communicate to the public this momentous decision?
According to Bloomberg’s survey of economists, 58 percent believe that the FOMC will announce an extension of Operation Twist at the end of its meeting at 12:30 pm today. The majority expect the Fed to extend the maturity of its securities portfolio by substituting the purchase of long-term securities, possibly even more mortgage-backed securities, as its short-term securities mature in order to further depress long-term, especially mortgage, interest rates. This alternative would not expand the money supply, but merely further distort credit markets. With the US inflation rate near its 2-percent “anti-deflationary” target and the break up of the euro at least momentarily averted by the results of the Greek election, 60 percent of the survey’s respondents do not foresee the implementation of the more radical stimulus of a third round of quantitative easing, which involves the expansion of the Fed’s balance sheet and the money supply through the net purchase of additional securities.Skip to next paragraph
This is the institutional blog of the Ludwig von Mises Institute and many of its affiliated writers and scholars commenting on economic affairs of the day.
Subscribe Today to the Monitor
But how will the new kinder, gentler and more transparent Fed communicate to the public this momentous decision? Will it do so frankly and in plain language? Right! According to a senior economist at Bank of America Corp. in New York, “The FOMC in its post-meeting statement could voice more willingness to buy [long-term] bonds if necessary, saying that it ‘stands ready’ to adjust its balance sheet rather than that it ‘is prepared’ . . . .”
The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on blog.mises.org.