Fed Grows Impatient And Moves Closer To Stimulus Rhetoric

Tuesday, July 24, 2012 23:11
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Fed Grows Impatient And Moves Closer To Stimulus Rhetoric

Tags: economy | Federal Reserve | inflation

The Fed is growing weary of waiting for the economy to rebound. It may decide to give it another boost. Conversations within the Fed have turned from whether to move to when and how to take action. The trick is to do so without triggering inflation.

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It may use the discount window to loan money directly to banks who, in turn, loan money to small businesses and consumers. But there is doubt that using the discount window would have much effect since banks currently have access to cheap credit.
 
Fed Chief Ben Bernanke increasingly impatient on the lack of job growth. He is concerned that the economy still has not gathered the momentum needed to achieve escape velocity—enough growth to move the country forward.
 
Those Fed officials primarily concerned about inflation have backed off a bit, giving the Fed room to take stimulus action. The consensus is the Fed will wait until the September meeting to make a decision because that will give them two more months’ worth of data to examine.
 
Even so, a new round of bond purchases, otherwise known as QE3 or a third quantitative easing, would probably be an unpopular move just before the November elections. But Bernanke has reiterated the Fed will act based on need rather than political expediency.

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