The Fed Just Telegraphed Not To Expect Much If Anything From Bernanke's 3:45pm Speech

Is the Fed telegraphing that today's 3:45pm speech, expected by many to presage some form of monetary easing preannouncement by the Chairman, will leave many disappointed? That could well be the case based on the just disclosed data from the Fed's mouthpiece, Jon Hilsenrath, who spoke to Chicago Fed's Evans. In the interview, we find that the Fed president decided to cut its outlook (long overdue), but more importantly, Evans, a diehard dove and a big fan of additional easing, announced that he "doesn’t want to add to [QE]." In other words, as we have been warning, the S&P will have to drop at least another 25% before the "high threshold" for more money printing is reached. Ironically, for the first time, discounting even near certain future events does not work, courtesy of Central Planning, which needs the market to act in a centrally planned way and drop despite the inevitable Zimbabwe reaction.

From the WSJ:

Charles Evans, president of the Federal Reserve Bank of Chicago, is marking down his growth forecasts for 2011 and 2012, but says he isn’t prepared to call for new Fed actions to support the economy.

In an interview with The Wall Street Journal, Mr. Evans said he now expects the economy to grow by 3% to 3.25% in 2011 and 3.5% and 3.75% in 2012, compared to the 4% growth rate he was expecting before a recent string of disappointing economic data.

He said the recovery remains intact and that the damaging effects of recent shocks to growth – such as Japan’s earthquake and tsunami – should prove transitory.

The Fed later this month will conclude its $600 billion Treasury securities purchase program. Mr. Evans doesn’t want to add to it, but he also has no inclination to reduce the Fed’s portfolio of mortgage or Treasury securities any time soon, he said.

Mr. Evans was among the Fed’s more outspoken proponents of the Treasury purchase program. His comments suggest that there isn’t a strong base at the Fed right now for more monetary easing. Proponents of the Fed’s easy money stance might instead be focused on keeping the current policy in place for a long time.


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