Uh oh. The people of the United States have just been promised by Federal Reserve Chair Janet Yellen that she will “do all that I can’ to save the national economy. With such a declaration, it is time to be prepared for higher price inflation, more unemployment and an increased cost of living.
Speaking at a swearing-in ceremony at the central bank in Washington, Yellen vowed to give a boost to the economy, which she says maintains low inflation and high unemployment. Although the comments were quite brief, they were a sign that she plans to either maintain the current program left by her predecessor, Ben Bernanke, or she will likely fire more monetary guns.
Yellen confirmed that the economy has fallen short of some of the Fed’s goals, but stated that “the economy is stronger and the financial system is sounder. We have come a long way, but we have father to go.”
“I promise to never forget the individual lives, experiences and challenges that lie behind the statistics we use to gauge the health of the economy.”
Not everyone thinks the Fed’s present policies will help the economy. Dallas Fed President Richard Fisher, an ardent opponent of the central bank’s quantitative easing measures, delivered a speech in Mexico City on Wednesday, according to Reuters, in which he lambasted QE and inflation.
“There are increasing signs quantitative easing has overstayed its welcome: Market distortions and acting on bad incentives are becoming more pervasive,” said Fisher. “The real tools that we are focusing on are how we manage the exit from the current hyper-accommodative monetary policy and how do we make sure … that we do it in a way that doesn’t allow the current very large and presently non-inflationary monetary base … from becoming inflationary.”
Despite the Fed tapering its $85 billion-per-month QE, many still expect it to actually increase it within the next year because the markets heavily rely on the monthly stimulus. The program has caused the Fed to hold a balance sheet of more than $4 trillion and that figure is expected to jump to approximately $6 trillion by the time President Obama leaves office.