美联储的直升机飞不起来鸟# Stock
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Hiring has slowed, economic growth has eased, inflation is tame and millions
of Americans remain unemployed. In short, the recovery is stalling.
But after more than three years of trying to stimulate the economy, what
else is the Federal Reserve to do?
That's the predicament Fed Chairman Ben Bernanke and his crew will face this
week, as the Federal Open Market Committee meets in D.C. Tuesday and
Wednesday.
Should they chose to act soon, here are some options on the table:
1. Extend Operation Twist
Likelihood: High
Dubbed Operation Twist, this policy swaps $400 billion in short-term bonds
for ones with a longer duration. The aim is to push down long-term interest
rates, thereby making it cheaper for businesses to get loans and consumers
to get mortgages and other forms of credit.
While it's unclear just how effective Operation Twist has been so far, it is
true that long-term rates have come down since October, when the program
started. Simultaneously, mortgage rates have fallen too.
Just how much this has helped the economy though is questionable. Even with
mortgage rates at record lows, new home sales have been choppy and banks are
still unwilling to lend to anyone will less-than-perfect credit. Small
business owners are also struggling to get loans.
That said, the Fed is still likely to consider extending Operation Twist
beyond its original June 30 end date. Unlike other methods of boosting the
economy, Operation Twist doesn't add to the balance sheet and therefore won'
t be met with as much resistance.
Atlanta Fed President Dennis Lockhart, who just a month earlier had said he
opposed the idea, told reporters last week that it's still one of several
options on the table.
But the Fed doesn't have much wiggle room in this area. Should it decide to
extend Twist, it has only a limited supply of short-term bonds left in its
arsenal. That diminishes the potential impact this plan could have.
2. Launch QE3
Likelihood: Medium
Buying more Treasuries is another possibility for the Fed, but it comes
along with greater risks. The central bank has already embarked on this
policy -- known as quantitative easing or QE -- twice now, and while it has
pushed interest rates lower, it has yet to solve the job market's woes.
That's because low interest rates aren't effective unless banks lend out
their money. That still isn't happening. The frequency at which money
changes hands in the U.S. economy is now at a record low.
Adding a third round of QE is unlikely to change that, plus it comes with
greater risks. It would increase the Fed's balance sheet and ignite
controversy among conservatives and inflation hawks.
That said, some economists think it's still a possibility later this summer,
but only if the economic outlook gets worse.
Bernanke's number two in command, Fed Governor Janet Yellen, has recently
hinted to being open to such a policy if the recovery continues to struggle.
Related: More stimulus possible, Yellen says
Bernanke has been unwilling to offer any hints lately, but watch for more
from him in August. In the past few years, he has waited until the Kansas
City Fed's key meeting in Jackson Hole, Wyo., to break news of any bold new
plans.
3. Change interest rate forecasts
Likelihood: Low
The Fed has kept interest rates near zero since December 2008 in an attempt
to boost the economy. But the central bank can also have an impact merely by
signaling to investors where it thinks interest rates should be in the
future.
The Fed's most recent forecasts suggest interest rates should stay "
exceptionally low" until late 2014. Extending that language to say 2015 or
later could spur economic activity by eliminating some uncertainty about
future interest and inflation rates.
Economists say such a move is unlikely to have much impact though. So much
can change over the next two or three years. The presidential election, for
one, could change expectations for future tax and spending policies.
Plus, the makeup of the Fed is scheduled to change. Bernanke's term as
chairman ends in January 2014, and whoever his successor is could have
different ideas.
Yellen has said "the effects of forward guidance are likely to be weaker the
longer the horizon of the guidance, implying that it may be difficult to
provide much more stimulus through this channel."
The Fed will release its official statement at 12:30 p.m. ET on Wednesday,
followed by a press conference with Bernanke at 2:15 p.m.
of Americans remain unemployed. In short, the recovery is stalling.
But after more than three years of trying to stimulate the economy, what
else is the Federal Reserve to do?
That's the predicament Fed Chairman Ben Bernanke and his crew will face this
week, as the Federal Open Market Committee meets in D.C. Tuesday and
Wednesday.
Should they chose to act soon, here are some options on the table:
1. Extend Operation Twist
Likelihood: High
Dubbed Operation Twist, this policy swaps $400 billion in short-term bonds
for ones with a longer duration. The aim is to push down long-term interest
rates, thereby making it cheaper for businesses to get loans and consumers
to get mortgages and other forms of credit.
While it's unclear just how effective Operation Twist has been so far, it is
true that long-term rates have come down since October, when the program
started. Simultaneously, mortgage rates have fallen too.
Just how much this has helped the economy though is questionable. Even with
mortgage rates at record lows, new home sales have been choppy and banks are
still unwilling to lend to anyone will less-than-perfect credit. Small
business owners are also struggling to get loans.
That said, the Fed is still likely to consider extending Operation Twist
beyond its original June 30 end date. Unlike other methods of boosting the
economy, Operation Twist doesn't add to the balance sheet and therefore won'
t be met with as much resistance.
Atlanta Fed President Dennis Lockhart, who just a month earlier had said he
opposed the idea, told reporters last week that it's still one of several
options on the table.
But the Fed doesn't have much wiggle room in this area. Should it decide to
extend Twist, it has only a limited supply of short-term bonds left in its
arsenal. That diminishes the potential impact this plan could have.
2. Launch QE3
Likelihood: Medium
Buying more Treasuries is another possibility for the Fed, but it comes
along with greater risks. The central bank has already embarked on this
policy -- known as quantitative easing or QE -- twice now, and while it has
pushed interest rates lower, it has yet to solve the job market's woes.
That's because low interest rates aren't effective unless banks lend out
their money. That still isn't happening. The frequency at which money
changes hands in the U.S. economy is now at a record low.
Adding a third round of QE is unlikely to change that, plus it comes with
greater risks. It would increase the Fed's balance sheet and ignite
controversy among conservatives and inflation hawks.
That said, some economists think it's still a possibility later this summer,
but only if the economic outlook gets worse.
Bernanke's number two in command, Fed Governor Janet Yellen, has recently
hinted to being open to such a policy if the recovery continues to struggle.
Related: More stimulus possible, Yellen says
Bernanke has been unwilling to offer any hints lately, but watch for more
from him in August. In the past few years, he has waited until the Kansas
City Fed's key meeting in Jackson Hole, Wyo., to break news of any bold new
plans.
3. Change interest rate forecasts
Likelihood: Low
The Fed has kept interest rates near zero since December 2008 in an attempt
to boost the economy. But the central bank can also have an impact merely by
signaling to investors where it thinks interest rates should be in the
future.
The Fed's most recent forecasts suggest interest rates should stay "
exceptionally low" until late 2014. Extending that language to say 2015 or
later could spur economic activity by eliminating some uncertainty about
future interest and inflation rates.
Economists say such a move is unlikely to have much impact though. So much
can change over the next two or three years. The presidential election, for
one, could change expectations for future tax and spending policies.
Plus, the makeup of the Fed is scheduled to change. Bernanke's term as
chairman ends in January 2014, and whoever his successor is could have
different ideas.
Yellen has said "the effects of forward guidance are likely to be weaker the
longer the horizon of the guidance, implying that it may be difficult to
provide much more stimulus through this channel."
The Fed will release its official statement at 12:30 p.m. ET on Wednesday,
followed by a press conference with Bernanke at 2:15 p.m.