http://albertpeia.com/fedpunchedout.htm
‘A month ago, we noted that the
Fed was becoming increasingly splintered about how to proceed with its monetary
policy. At that time we noted that the latest FOMC minutes indicated that the
Fed was in fact conflicted about QE 4 despite its public appearance of being
unified:
Consider its recent
FOMC minutes released on January 3 2013.
With regard to the
possible costs and risks of purchases, a number of participants
expressed the concern that additional purchases could complicate the
Committee’s efforts to eventually withdraw monetary policy accommodation, for
example, by potentially causing inflation expectations to rise or by impairing
the future implementation of monetary policy. Participants
also discussed the implications of continued asset purchases for the size of
the Federal Reserve’s balance sheet. Depending on the path for the
balance sheet and interest rates, the Federal Reserve’s net income and its
remittances to the Treasury could be significantly affected during the period
of policy normalization. Participants noted that the Committee would
need to continue to assess whether large purchases were having adverse effects
on market functioning and financial stability. They expressed a range of views
on the appropriate pace of purchases, both now and as the outlook evolved.
It was agreed that both the efficacy and the costs would need to be carefully
monitored and taken into account in determining the size, pace, and composition
of asset purchases.
Source: Fed FOMC
minutes
Remember, the Fed
only just announced QE 3 in September 2012 and QE 4 in December 2012. At the
time of these announcements, the media heralded these moves as indicating that
the Fed would act aggressively forever.
Instead, the Fed was
actually quite conflicted about QE 4. And we just got yet ANOTHER major warning
sign that the Fed is changing tactics.
Indeed, Fed
uber-dove, Charles Evans, who called incessantly for more QE throughout
2011-2012, just stated that the Fed may in fact END QE BEFORE
unemployment falls to 7%.
Charles Evans,
president of the Federal Reserve Bank of Chicago, said today the central
bank may stop its asset-purchase program before unemployment falls to 7
percent.
“I tend to
think it might be possible to turn off the quantitative easing,” Evans said in
a CNBC interview. “We might be able to stop before 7 percent” assuming momentum
builds and keeps going.
Federal Reserve Bank
of Chicago Chief Executive Officer Charles Evans said that quantitative easing
would continue until it’s clear the labor market outlook has improved.
The bulls and
mainstream media are ignoring the implications of this. But this is a serious
sign that the Fed will be changing course going forward.
Understand that the
Fed has blown yet another bubble in stocks and cannot simply remove the stimulus
punch bowl all at once without risking a total collapse in the market. So the
Fed is going to begin managing expectations downward gradually.
The fact that Evans,
a man who has called for nothing but more stimulus for more than two years, is
now stating point blank that the Fed may end QE before it reaches its
target for unemployment is a major warning sign. Do not ignore it.
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