Earlier this week, we got the minutes from the June Federal Open Market Committee (FOMC) meeting. Also, Fed Chairman Ben Bernanke spoke about and answered questions about monetary policy at an NBER conference in Massachusetts.
For the most part, the markets appeared to interpret the tone as dovish. In other words, they were convinced that it might be less likely that the Fed would taper, or gradually reduce, its quantitative easing program.
In what appeared to be unrelated news, Fed Governor Elizabeth Duke submitted her resignation to President Obama.
Not much was made of the resignation.
But Wall Street veteran Art Cashin thinks that there may be more to it.
From this morning’s Cashin’s Comments (emphasis added):
Some Weekend “Taper” Ponders – I encourage everyone to reread the FOMC Minutes. I think there was a clear tone to taper or wind down QE by yearend (or maybe sooner). At the same time, the FOMC seemed to see the recovery as struggling and almost fragile.
Now, add in the surprise resignation of Elizabeth Duke as a Fed Governor and voting FOMC member. “Betsey” as Mr. Bernanke refers to her, was said to be the key broker in setting up the current QE.
Put your Lt. Columbo hat on and ponder this: Could the FOMC have found some negative consequence caused by QE? Might that have prompted discussion and an interest to wind down or exit despite a still non-robust economy? The tone of the Minutes and the new resignation may hold interesting clues.
For now, the economy appears to be weak enough and inflation seems to be low enough that the monetary system would be able to tolerate more QE.
What could have Cashin raising an eyebrow?
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