Dudley Joins Yellen In Leaving QE Door Wide Open

Tyler Durden's picture

Last night it was uber-dove Janet Yellen, today it is uberer-dove, former Goldmanite (what is it about Goldman central bankers and easing: Dudley unleashing QE2 in 2010, Draghi unleashing QE LTRO in Europe?) Bill Dudley joining the fray and saying QE is pretty much on the table. Of course, the only one that matters is Benny, and he will complete the doves on parade tomorrow, when he shows that all the hawkish rhetoric recently has been for naught. Cutting straight to the chase from just released Dudley comments:"we cannot lose sight of the fact that the economy still faces significant headwinds and that there are some meaningful downside risks... To sum up, the incoming data on the U.S. economy has been a bit more upbeat of late, suggesting that the recovery may be getting better established.  But, while these developments are certainly encouraging, it is far too soon to conclude that we are out of the woods in terms of generating a strong, sustainable recovery.  On the inflation front, the year-over-year rate of consumer price inflation has slowed in recent months, and despite the recent rise of gasoline prices, we expect inflation to moderate further in 2012." Translate: NEW QE is but a CTRL-P keystroke away now that all the inflation the Fed usually ignores continues to be ignored.

Full remarks - link

William C. Dudley, President and Chief Executive Officer

Remarks at the Center for Economic Development, Syracuse, New York

Good morning, I am pleased to be here in Syracuse at the Center for Economic Development.  It is always a pleasure to speak with business and community leaders because of the important role you play in helping to shape the economy of the region.  I thank you all for inviting me here today.

I try to get out of my office in New York City as much as I can to get a sense of regional economic conditions across the second Federal Reserve District.   I was last here in Syracuse in 2010 and, more recently, I traveled to West Point and the Capital region and Long Island.    

These visits are just as important as any trip I might take to Washington, D.C., to help formulate monetary policy, or to Switzerland, to help shape international bank regulation.  Each visit within the region helps me to deepen the relationships with the people I represent.  I believe that the understanding of issues and concerns that I gain today will help ensure that the Fed’s policy decisions reflect the public interest.

Today, I want to talk a bit about the Fed—what we do and why we do it.  Then I’ll provide some thoughts about the economic outlook nationally and locally.  After that, I’ll be happy to answer any questions you have about what the Fed does and why, and about the economic outlook.

As always, what I have to say reflects my own views and not necessarily those of the Federal Reserve System or the Federal Open Market Committee, also known as the FOMC.

What the New York Fed Does

By way of introduction, I will briefly review what my colleagues and I do at the New York Fed on behalf of the Second District. 

I have the great fortune to serve as the vice chair of the FOMC that meets eight times a year in Washington to set interest rates and make other decisions about monetary policy.  The members of this committee all strive to set policy to advance the mandate given to us by Congress to promote the maximum level of employment consistent with price stability.  Sometimes we have different views on the specific policy choice at hand, and you should view this as completely appropriate: these are hard questions—particularly during difficult economic circumstances such as we face today.  In fact, I think we make better decisions as a committee because we don't all think alike.  But we are united in our commitment to our dual mandate and in our belief that Fed independence is essential to the public interest.  That independence allows us to make tough decisions insulated from short-term political pressures.

At FOMC meetings, each Committee member presents a current outlook for his or her region and the nation.  For these assessments, we consult our researchers and add critical information that we learn from listening to our boards of directors, regional advisory councils, community leaders and other key stakeholders, such as you and others I'll meet on this visit.  For example, last month members of our small business advisory council told us that for the first time in several years, employees were leaving for other jobs and that they would need to replace those who left for better opportunities elsewhere.  The fact that some people with jobs felt confident enough to seek and take other job opportunities was another signal to us that the job market may be improving—although, to be sure, we read such signals cautiously.  

To help me gather more information about the region, I will be meeting this morning with PathStone, a community development and human service organization serving farmers and low-income families and communities, then meeting with students and faculty at the Maxwell School at Syracuse University, and then having lunch with faculty of the Maxwell School and the university officials who manage the tech transfer process.  This afternoon, I will drive to Skaneateles Falls to tour Welch Allyn, a manufacturer of diagnostic equipment, and meet with the president and CEO, Dr. Julie Shimer.  Dr. Shimer also recently became the chair of the Empire State Development Corporation and I am looking forward to our discussion about the challenges and opportunities for economic development in Upstate New York.

Tomorrow, I will address the Buffalo-Niagara Partnership at their Movers & Shakers Breakfast, speak with staff of the Empire Justice Center, meet with Lt. Governor Bob Duffy, convene a meeting of our Upstate Advisory Board, whose members are major leaders in the upstate economy, and visit the Roswell Park Cancer Institute to learn about their role in economic development in western New York and in the broader world arena.

My colleagues and I at the New York Fed continually track conditions in our District, and we have created a number of tools for that purpose.  For example, my staff produces monthly indexes of economic activity for New York City, the state of New York and New Jersey.  These indexes are essentially measures of local output—similar to gross domestic product, or GDP, at the national level.  The measures provide a more complete gauge of activity than the employment report, which is another important metric at the state and regional levels.  We have also constructed a consumer credit panel to track local household credit conditions at the county and even the zip code level, including the amount and type of personal debt and whether payments are being made in a timely way.

In addition, we conduct a periodic poll about the credit needs of small businesses in the region, which are an important source of new jobs.  We are just launching our latest poll that also includes questions about the skill needs of small businesses and whether the right kinds of skilled labor are available.  Almost 900 businesses responded to our last poll, some of which were from this area.  If you, as a representative of a small business, would like to participate in our current poll, please pass your card to my colleagues, who are in the audience, or see me after the speech and we will be glad to add you as a respondent.

Results from our prior polls stressed the problem of access to capital.  In response we held two workshops at the Bank in December.  In the first workshop, senior officers from the Export-Import Bank, the Small Business Administration and the Department of Commerce described the various loan programs available to small businesses from their agencies, as well as programs to help identify markets.  The second workshop reviewed the business plans of 40 small businesses and matched them with potential lenders.  We plan to hold a similar workshop in Upstate New York this year.

As you know, even states that are wealthier, such as New York, have large pockets of poverty.  So, we target some of our work specifically to low- and moderate-income groups.

We have worked hard to help neighborhoods that face high foreclosure rates, although much remains to be done.  We have provided housing advocates with the latest information on mortgage conditions, via mortgage briefs, roundtables, presentations and newsletters.  We have developed an interactive online tool that shows monthly delinquency and foreclosure conditions, which we believe will aid the work of housing counselors and other parties seeking to help these communities.  It is available on our website along with data and information useful to policymakers, business people and the public.

We use our website to share what we learn about our diverse District, and you will find extensive detailed information about the region at the site.  I invite you to visit newyorkfed.org to explore our highly localized maps and information on small business, credit and housing conditions, and even the latest job openings at the New York Fed.

Finally, and crucially, in the aftermath of the financial crisis, we are working with our colleagues in Washington, D.C., and at other agencies to help put the nation's financial system on a firmer footing.   Our supervisors are working hard to ensure that our District’s banks are operating safely and soundly.  Although much has been done, we are not finished and are determined to keep at it.  I recognize fully that there can be no return to pre-crisis business as usual—whether on the part of the financial sector or on the part of regulators like ourselves.

All in all, there is a lot to keep myself and my colleagues busy.

National Economic Conditions

Now I’d like to turn to the national and regional economy.  The incoming data on the U.S. economy generally has been a bit more upbeat over the past few months, suggesting that the recovery may be finally establishing a somewhat firmer footing.  Real GDP expanded at a 3.0 percent annual rate in the fourth quarter of 2011, the fastest growth since the first half of 2010.  The average monthly job gain was 212,000 in the first quarter of 2012, up from 164,000 in the fourth quarter.  Sales of light-weight motor vehicles were about 14 ½ million at an annual rate in the first quarter, the best quarter in four years.  Survey measures of business activity have rebounded from their dips in the middle of last year and are now at levels that typically indicate solid overall growth.  Even housing starts have firmed somewhat in the last few months, although they remain at depressed levels.

While these developments are certainly encouraging, it is still too soon to conclude that we are out of the woods, as underlined by the March labor market release.  To begin with, the economic data looked brighter at this point in 2010 and again in 2011, only to fade later in those years.

Moreover, the United States experienced unusually mild weather over the first quarter, with the number of heating degree days more than 20 percent below the average of the preceding five years, which may have pulled forward some economic activity and hiring. 

In this regard, the somewhat softer March labor market report that was released last Friday may reflect the earlier positive influence of the mild weather on job creation in January and February, although other less sanguine interpretations are also plausible.  We thus will need to see more data to determine the extent to which the March data represent a transitory weather-related setback.

Regardless of the importance of the mild winter in distorting the recent economic data, real economic activity has yet to be strong enough on a sustained basis to make a big dent in the overall amount of slack in the U.S. economy.  While growth was stronger in the fourth quarter, most of it was due to inventory accumulation.  Growth of final sales remained quite weak.  Historically, quarters in which inventory investment makes significant growth contributions are typically followed by quarters in which that growth contribution is modest or even negative.  That appears to be what is shaping up for the first quarter of this year.

Based on available data, our current expectations are that real GDP will expand at around a 2 ¼ percent annual rate during the first quarter of 2012.  Even with the robust increase of light vehicle sales, overall consumer spending in the first quarter appears to be rising at a similar moderate rate.  At the same time, real disposable income has been flat over the past three months, and the large increase of gasoline prices is likely further sapping consumers’ real purchasing power.  And growth of business investment spending, which softened in the fourth quarter of 2011, may have been even a little softer in the first quarter of this year.

To put the recent pace of growth into perspective, we believe that the economy’s long-run sustainable growth rate—what economists call the potential growth rate—is around a 2 ¼ percent annual rate.  We need sustained growth above that rate to absorb the still substantial amount of unused productive capacity.  Thus, our recent growth rates are barely keeping up with our potential.

Even though the unemployment rate has declined sharply from 9 percent last September to 8.2 percent in March, it is still unacceptably high.  In addition, many other measures of the labor market remain weak.  The labor force participation rate, the percentage of people employed, and the total number of hours worked in the economy all dropped sharply during the recession and remain well below their pre-recession levels, even taking into account the impact of demographic shifts.  Also, it appears that productivity growth has slumped recently.  Although that means that a given amount of growth translates into bigger employment gains, it certainly is not an unmitigated positive development.

Also, we cannot lose sight of the fact that the economy still faces significant headwinds and that there are some meaningful downside risks.  In the headwinds department, I would include the run-up in gasoline prices mentioned earlier because that will sap purchasing power, the continued impediments to a strong recovery from ongoing weakness in the housing sector, and fiscal drag at the federal and state and local levels.  In terms of downside risks, these include the risk that growth abroad disappoints and the risk of further disruptions to the supply of oil and higher oil prices. 

On the inflation front, the overall rate of increase of consumer prices, as measured by the 12-month change of the price index for personal consumption expenditures slowed to 2.3 percent in February from a recent peak of 2.9 percent last September.  Even though the recent rise of gasoline prices mentioned above could interrupt this pattern, we expect this moderation of overall inflation to resume later this year.

While the underlying core inflation rate, that strips out volatile food and energy prices, has been somewhat higher than expected a few months back, it appears that the annual rate of core inflation1 has peaked and we expect it to begin to decline later this year.2  Finally, inflation expectations, which play an important role in the inflation process, remain well anchored.  By this I mean that people expect that the rate of inflation will continue to be relatively low for some time to come.

Regional Economic Conditions

So how is the recovery proceeding in the state and region?  As I mentioned, the New York Fed produces indexes that help us track economic activity in the region.  Based on these measures, the economic recovery that began in New York State in late 2009 has continued through early 2012, and even gained some momentum.

Across Upstate New York, broadly speaking, the cycle of recession and recovery has been much less pronounced than in the nation, and even the state as a whole. This pattern has been true in Syracuse, as well. Employment fell by a little over 4 percent during the downturn—a steep drop, to be sure—but only about two-thirds of the decline that occurred nationally.  This is quite a change from the region’s past recessions, which have tended to be longer and deeper than the nation’s.

One reason why Upstate New York weathered the economic storm a bit better than the nation is the resiliency of its housing markets.  Like much of Upstate New York, Syracuse’s housing market has been relatively stable and did not experience a boom-bust cycle like much of the rest of the nation.  In fact, since the peak of the national housing market in early 2006, home prices in Syracuse have increased by close to 10 percent, compared with a decline of more than 30 percent nationally.

As a result, the drop off in economic activity that is connected, directly and indirectly, to the performance of the housing sector has not been as severe here as it was in many other places.  This stability is underscored by our latest quarterly consumer credit panel data, which shows that total household debt burdens have remained relatively low by national standards and that mortgage delinquency rates are lower in the Syracuse region than in other parts of the state and nation.

However, while the national recovery has started to gain some momentum in recent months, job growth in Syracuse has remained somewhat weak.  To date, the region has regained only about a third of the roughly 13,000 jobs that were lost during the downturn.  So the recovery has been disappointing thus far.  

Despite the weak overall job growth, the region continues to undergo substantial economic restructuring.  And, in fact, many parts of the economy are growing.  Most prominently, the business services sector has added about 2,000 jobs since the recession ended, and the leisure and hospitality sector has also expanded.

As a result of the economic restructuring in Syracuse, health and education are now among the most important industries in the region, employing roughly a fifth of all workers.  While the “eds and meds” sector experienced some job losses last year, it is generally less susceptible to downturns than other sectors of the economy, and expanded before, during and after the Great Recession. No doubt, the area’s many local colleges and universities play an important role in this regard.

Syracuse’s colleges and universities deserve special attention because they are important regional assets that can help Syracuse continue to actively participate in the knowledge economy.  Our own research at the New York Fed has shown that higher- education institutions can help to build their local area’s skilled workforce, which is critical to the long-run economic success of any region.  These institutions produce highly skilled labor and help their regions innovate by creating new knowledge and inventions through academic research and development.  It can be especially beneficial for local businesses to take advantage of the research facilities available at local colleges and universities.

Partnerships between private industry and higher-education institutions are an important ingredient in this regard.  Going forward, I believe these partnerships will become more important than ever—particularly for places like Syracuse that continue to experience economic restructuring.  Fortunately, this region already has a strong higher education industry in place.


To sum up, the incoming data on the U.S. economy has been a bit more upbeat of late, suggesting that the recovery may be getting better established.  But, while these developments are certainly encouraging, it is far too soon to conclude that we are out of the woods in terms of generating a strong, sustainable recovery.  On the inflation front, the year-over-year rate of consumer price inflation has slowed in recent months, and despite the recent rise of gasoline prices, we expect inflation to moderate further in 2012.

Here in Syracuse, while the recovery to date has not been as strong as we would like, the region’s vibrant health and education sector provides a solid base for longer-term growth.

Thank you for your kind attention.  I would be happy to take a few questions.

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GetZeeGold's picture



Stop QE....and do what?


Oh regional Indian's picture

Thus, no stop. Only losses. 

Seems clear enough that the QE/NOQE game is the control lever being used for commodity price manipulation, PM's for sure, oil also. 

This is their way of tip-toeing to the edge of the abyss (which does not really exist, it can ALL be brought back in balance).

It'll be slow and silent till it can. After that, TRANSFORMERS>>>>> FTW.



TruthInSunshine's picture

Artificially low (i.e. non-market based) treasury interest rates (can the U.S. structure survive higher interest payments on its massive and pepertually growing larger debt?) or continued artificial, central bankster interventionist support (i.e. non-market based) for equity markets...

The Non-Federal Reserveless (growing more reserveless all the time) can't forever, or for even much longer, have both.

If one agrees, there will be a time when the system will require far more 'money' to rush into government treasuries, equities be damned.

Fed Goebbels-esque jawboning aside, decide upon which one is more necessary for the Ponzi to Ponzi onward and place your bets if you're playing at Casino BSD.

VonManstein's picture

this FED is launching pentagon style psyops.

We ZHers know its coming but this dove/hawk do dar is a real head fuck

The Swedish Chef's picture

Spot on!


QE has for the moment been replaced by talk of QE. Markets are carefully managed by the dove/hawk de jour. This way you can keep the markets where you want them and keep at least a bit of surprise effect for the time when you neeed to launch any type of asset purchasing/refi/swap/God-only-knows operation.


And to think there are people who actually think this is a free market...

Mae Kadoodie's picture

Masters jawboning their serfs was always part of the plan.

GetZeeGold's picture



Here.....have some bread for your circus.


OpenThePodBayDoorHAL's picture

Since when is it the Fed's job to "...generate a strong and stable recovery". F*cking Communists/Statists/Fascists/Corporatists. Anyone who thinks Obomba is a Communist is right. He's a Communist for the 1%/banksters. Robber Baron Capitalism for the rest of us though

LongSoupLine's picture



The Pentagon is taking notes and aspires to be as good as the Fed with dis and mis-information public carpet bombing.

Hell, Goebbels is near punching through his pine box in sheer joy of his star pupil.

LongSoupLine's picture



I hope Dudley gets hit square in the fucking head by a speeding NYC bus with Goldman Sacks ads on the side of it...f'ing poetic it would be.

trampstamp's picture

How many more times will they play this stupid possible QE thing and ramp the markets higher?  

GetZeeGold's picture



No QE evermore.......we'll just grow the money on trees.


Unless you can persuade China to buy more bonds....yeah....I didn't think so.


Vince Clortho's picture

As long as the muppet puppets go along with it.

Screwball's picture

Have we heard who the replacement for Brian Sack is yet?

Cdad's picture

My God, this market is pathetic.  It limps forward from Fed speech to Fed speech lookin' for more free money...to replace all the real money that has left it, of course.  And these Fedsters continue on, promising more of the same thing that put the junkie market in this sad, sad position.

How did it come to this?  Ah...of course.  But for a criminal syndicate of Wall Street bankers that broke the housing market, broke the equity market, and is now entirely destroying the bond market.  

Way to go Wall Street junkies everywhere!  You truly have earned your place as the "Enemy of the people."

ekm's picture

Does it matter any longer?

valley chick's picture

ekm...each day I can prepare even more is a bonus.  As I wishing this ride would end I try to utilize the little time left.  :(

ekm's picture

I am patiently reading and studying the market. ZH is a knowledge treasure. The more I read, the more I get convinced we'll have 2000 pts dow drop in one day, soon.

valley chick's picture

agreed ekm.  :)  As i use to be one of the grazing sheeple..it is alot to wrap my thoughts around and to rewire myself to think independently.  But I have and thanks to the ZH and the posters here. 

Yogieu's picture

I studied economics (yeah, I learnt and read a lot of crap :)) and in my case ZH was an eye opening experience. It's indeed a treasure. When ZH is going to issue shares? They will skyrocket after collapse... DOW 2000 down, ZH 10000 up :)

Yogieu's picture

btw: I remember you mentioned that you lived in communism before. Which country was it?

Clint Liquor's picture

The Benank says something hawkish, Equities collapse and investors run to Bonds. Then they say something dovish and they run from Bonds to Equities. Back and forth, over and over. For those of us on the sidelines (sitting on a stack of PMs) it's like watching a tennis match.

wang's picture
wang (not verified) Apr 12, 2012 7:08 AM




Ah yeah, right about now Dudley's in de mothafuckin' house [yeah do it do it]
QE3's in full effect
Hey yo Yellen, kick me that funky-ass beat
Yeah, who's in de mothafuckin' house?
Dudley's in the mothafuckin' house!
Yeah, Dudley's definetly in the house
Hey yo Plosser, what we're gonna do?




LongSoupLine's picture

Trayvon?...that you?


(too early?)...nah.

rebelscum1967's picture

All this FED-speak back and forth is just misdirection...trying to get muppets to swing at a pitch in the dirt. It will work until it doesn't...until there is a hideous auction in Europe that can't be CNBS'ed over. Europe is a shit pile and everyone is pretending it isn't doesn't change the fact that it's a shit pile.

GMadScientist's picture

Heyyyy batta-batta-batta-batta....suh-wiing batta.

Christoph830's picture

LIESman on CNBS this morning saying that Dudley's comments, along with Yellen et al signal QE is "not on the table". Fade you, Steve. FADE YOU.

Quinvarius's picture

I wonder if he understands something as simple as the Fed buying Treasuries is QE?  I think CNBC is too dense to make distinctions between the various asset classes that can be involved in QE.  If they want to say, "no MBS purchase QE", that is different than saying, "no QE at all".  Because it is quite obvious to me that the Treasury purchases cannot possibly stop until the gov stops borrowing.  The Gov cannot stop borrowing until the economy recovers enough for a tax base to pay down debt.  The window for that to happen without a hyperinflation of the money supply has long since closed.

The same boring strategy is what will keep on working.  But gold and silver, or some other alternate currency/asset you think will survive outside the US paper implosion.

JustObserving's picture

Are we not borrowing 50% of what the Federal government is spending?  And the US economy is  supposedly growing. What happens when we have a slowdown?

Unfunded liabilities for Medicare and Social Security are growing at $6.63 trillion a year.  That is the elephant in the room that no one can see.

We have no choice but to keep on printing.

Quinvarius's picture

I hate these dicks.  The economy should not be about what some money cartel decides.  Haven't we suffered enough at the hands of these idiots?  I do not like speculating.  I am forced to do it because our money is worthless paper and I am forced to use it.  I feel like a fucking Chinese gold farmer in WOW--Forced to play some game so i can get fake money to trade for real stuff. 

yogibear's picture

Both Dudley and Yellen are looking past their current jobs for a well paid position on Wall Street. If they keep juicing the stock market their going to make many firms on Wall Street exceptional profits.

Their using the only tool left, printing/devaluing the dollar. It just takes more and more devaluation to get the same stimulus effect. 

Like the drug addict that keeps increasing the strength until the addict dies. Dudley and Yellen's member banksters have already maxed out many 20 somethings with enormous education debt that will be with them for decades. More and more debt is not the solution.



lizzy36's picture

Awesome - more wealth effect.

Oil @ $150 a barrel going to be awesome for job creation.

Addicts unite and buy equities. Misallocation of capital and cheap money forever.

Winston Churchill's picture

The only important prognasticrations at the moment are what the BRICS

are saying..They're saying NO more QE.If the Chairsatatan does it

anyway,the $ will be finished this year as a reserve currency.

$400 + a barrel of oil.

Village Smithy's picture

That is an interesting angle. Certainly the end of QEing will be forced upon the Fed by something exogenous. Why not the BRICS?

midgetrannyporn's picture

If they QE the clownbux will just fatten the banker's wallets. Why don't they send it to me instead? [/stupid question]

chinaboy's picture

They will keep doing what they are doing until something really bad happens. The funny part is that the most educated part of the population insist on printing.

Platinum_Investor's picture

Bring on the QE !!  I want it... I'm prepared for it.  I know it will happen as if it doesn't who will buy the debt after June?