According to a report from the Washington Post, experts in the financial markets are concerned that the Federal Reserve could cut off its massive stimulus programs. The concerns have become rampant after minutes posted from a recent Fed meeting suggested there was a debate over such a move.
During the Wednesday trading session, stocks even pulled back due to those fears. There was a small vocal group of Fed officials that questioned whether or not the $85 billion in monthly purchases of Treasury securities and mortgage-backed securities are actually doing more harm than good. However, as the Fed has done for years now, the central bank concluded that it will persist to add tens of billions of dollars each month indefinitely.
“[Officials] noted examples of past instances in which policy makers had prematurely removed accommodation, with adverse effects on economic growth, employment and price stability,” the minutes stated. “They also stressed the importance of communicating the committee’s commitment to maintaining a highly accommodative stance of policy as long as warranted by economic conditions.”
Fed officials that are in support of Chairman Ben Bernanke’s initiative argue that consumers are just beginning to enjoy the benefits of low interest rates, access to easier and increased credit and other measures that the central banks say is benefitting the economy. If the Fed were to withdraw the program then it could hurt the economy so they are settling with letting it filter through the national economy.
The New York Times reported that analysts still see Bernanke as being in charge of the Fed’s policy-making committee. Also, Bernanke can garner more support because there are several officials that want to do more to stimulate the economy.
For instance, Narayana Kocherlakota, president of the Federal Reserve Bank of Minneapolis, has noted in the past that the Fed should keep interest rates low in the short-term until the unemployment rate dips to 5.5 percent. The Fed intends to maintain low interest rates until the jobless figure hits 6.5 percent, but it depends on how it gets there. The current unemployment rate stands at 7.9 percent.
Although there isn’t a consensus that the Fed should increase its securities purchases, a significant portion of the 12-member committee wants to have the Fed’s investment portfolio remain as it is for a longer period of time as the United States economy recovers.
It was discovered in the minutes that the committee will hold a meeting to review the asset purchase policy on Mar. 19 and 20.
Economic Collapse News reported last week that Fed Vice-Chair Janet Yellen, who is considered a top contender to replace Bernanke at the end of his term in 2014, told a conference that inflation remains relatively low, while the unemployment is higher than official estimates. She approximated that the jobless rate is actually 14.4 percent because the federal government doesn’t take certain factors into account, such as 800,000 discouraged workers who have given up seeking employment and roughly eight million workers who are in part-time jobs but would prefer to work a full-time job.
The Bureau of Labor Statistics (BLS) announced Thursday that the consumer inflation rate held steady in January. On an annual basis, prices rose 1.6 percent, but on a month-to-month basis prices were labeled as unchanged.
Although officials, Keynesian economists, such as Nobel laureate Paul Krugman, and media outlets like to insist that inflation is non-existent because of the CPI figures, Austrian thinkers make the case that the establishment doesn’t report the inflation numbers accurately and they prefer to suppress certain data that suggests massive inflation numbers.
Those in the media like to accuse Austrians of making up their own definitions for words. For instance, it was recently opined that Austrian theorists incorrectly say inflation is the act of increasing the money supply, which leads to the causes of inflation, such as the spike in prices.
“In popular nonscientific usage, a large increase in the quantity of money in the broader sense (q.v.) which results in a drop in the purchasing power of the monetary unit, falsifies economic calculation and impairs the value of accounting as a means of appraising profits and losses,” the classical definition of inflation at Mises.org.
Peter Schiff, president of Euro Pacific Capital and ardent critic of the Fed, published a video in January that accused the CPI of “doing a lousy job of measuring inflation” and it “deliberately does so by design.”
“The CPI is no longer a tool to accurately measure inflation, but an instrument of propaganda the government uses to hide accelerating inflation from the public and financial markets,” stated Schiff in his video. “Modest CPI increases over the past several years do not reflect an absence of inflation, but a design flaw in the index that fails to fully capture the magnitude of price increases. Central bankers drawing economic conclusions regarding inflation and monetary policy based on this highly flawed data point are making a major policy error.”
Anyone been to a grocery store lately?
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