Fed Officials: Where do they Stand?

How close is the Federal Reserve to easing monetary policy in November? Pretty close if we look at the views of different FOMC members. However the skepticism of some officials could compromise the overall size of the asset purchase program.

Read on to find out where FOMC voters stand:

Voting Members of the FOMC

Believe More QE is Necessary

1. Ben Bernanke – Said earlier this month that “additional purchases will ease financial conditions and help the economy.”
2. William Dudley – Said on Oct 1 that “more action from the Fed is warranted unless the outlook changes.”
3. Eric Rosengren – Said on Sept 29 that the Fed needs to respond “vigorously” and “creatively” to the serious economic problem” posed by high unemployment, sluggish growth and undesirably low inflation.

Oppose More QE

1. Thomas Hoenig – Has been voting for tighter monetary policy since the beginning of the year.
2. Kevin Warsh – Traditionally leans towards more hawkish policies – said on Sept 28 that the “markets are normalizing if not normal” already and the “economy is improving if not improved.”

Undecided

1. Sandra Pianalto (Possibly Dovish) – Leans towards more stimulus, very worried about sluggish growth and high unemployment and said Oct 1 that she is assessing the effectiveness of the Fed’s tools to stimulate the economy.
2. Daniel Tarullo (Traditionally Dovish) – Hasn’t talked about monetary policy recently but is traditionally a dove and supported a high degree of policy accommodation back in April.
3. James Bullard (Possibly Dovish) – On Friday, he said “more easing is not obvious” but he leans towards more stimulus after having previously said that “more help from policy may be needed to push up inflation.”
4. Janet Yellen (Unclear) – Is traditionally a dove but in her first speech as Vice Chair yesterday, she expressed concern that accommodative policy may prompt risk taking while further easing could fuel leverage build up.
5. Sara Raskin (Unclear- Slightly Dovish) – Hasn’t made comments since joining the Board of Governors, but at her confirmation hearing, she said that the Fed only has a partial victory with stable prices when “many American households continue to face the perils of unemployment.”
6. Elizabeth Duke (Skeptical About More Stimulus) – Leans towards opposing additional stimulus – is skeptical about the effectiveness of large scale asset purchases and the Fed’s decision August decision to reinvest proceeds from mortgage backed securities

Bailout Plan Fails to Impress, Traders Worried More About Dominoes Effect

The Congressional agreement of the $700 Billion bailout plan has proved to be anti-climatic for the stock and currency markets. There was a relief rally in the US dollar Sunday evening, but it lasted for no more than a blink of an eye as more problems came knocking on the door for financial institutions. Investors quickly moved onto the latest problems with a string of bank bailouts announced in Europe and the practical failure of Wachovia. Being sold at $1 a share is almost the same as filing for bankruptcy.

THE DOMINOES EFFECT

The US dollar has weakened against the Japanese Yen, but its strength against the Euro and British pound indicate that the concerns for those currency pairs now shift to the prospect of further bank failures in Europe. In the Eurozone, Fortis was bailed out by Belgium, the Netherlands and the Luxembourg governments while the Hypo Real Estate group was bailed out by the German government. In the UK, Bradford and Bingley was nationalized by the UK government. If the US banking sector is a good model, then we know that this is just the beginning of bank failures as the dominoes effect triggers more losses. With the ECB interest rate decision scheduled for Thursday, the problems in the banking sector could pressure the European Central Bank to consider easing monetary policy.

On the heels of the bailout plan, the Federal Reserve has injected a tremendous amount liquidity into the global money markets by increasing their swap lines. This is driving gold prices through the roof as inflation fears soar and money flocks out of US dollars and into gold as the safe haven play. Nonetheless, the Fed is trying to tell the market that they are serious about providing liquidity with the size of today’s liquidity injection – they more than doubled their swap limits from $290B to $620B.

US COMPANIES PLAYING DEFENSE COULD BOOST RECESSION RISKS
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