This is a new term we haven’t seen before.
Mike O’Rourke of JonesTrading says that we’re now seeing the “Iraq” of monetary policy, meaning the Fed has entered into an extraordinary situation, from which it has no good plan to self-extricate.
The Iraq of Monetary Policy.
Is there a plausible exit strategy to avoid endless entanglement? This is one of the key questions of the Powell Doctrine that leaders are supposed to ask before entering a combat engagement. Today, NY Fed President and FOMC Vice Chair Bill Dudley gave a speech noting that the Fed’s exit strategy is “stale.” One might go a step further and say the Fed has painted itself into a corner. Dudley is a member of the BYD (Bernanke, Yellen, Dudley), the unofficial ruling triumvirate of the FOMC. Dudley was speaking about monetary policy at the zero bound at the Japan Society. The key highlight of Dudley’s speech today for the market was that “Because the outlook is uncertain, I cannot be sure which way—up or down—the next change will be.” Someone, please let us know when the outlook is certain.
In other “exit” news, POLITICO reported yesterday that Ben Bernanke held a private meeting with some GOP Congressmen, including Darrell Issa, who demanded to learn more about the size of the Fed’s bond portfolio.
Bernanke testifies in front of Congress today, so hopefully these topics will come up.