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Fed Mulling Shift

By Matthew Yglesias

"Fed Mulling Shift"

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Good news but not very good: “Federal Reserve officials will consider a modest but symbolically important change in the management of their massive securities portfolio when they meet next week to ponder an economy that seems to be losing momentum. [...] Buying new bonds with this stream of cash from maturing bonds—projected at about $200 billion by 2011—would show the public and markets that the Fed is seeking ways to support economic growth. It could also be a compromise that rival factions at the Fed support, as officials differ about whether and how to address a subpar recovery.”

As you can read in Ben Bernanke’s academic research, this sort of move won’t really make a difference unless it’s explicitly framed as part of an effort to increase the price level. Given the reference to “rival factions” it sure would have been nice for the Senate to have voted on the Obama administration’s Federal Reserve Board nominees in time for the August 10 Fed meeting.

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