Last night, WSJ’s John Hilsenrath reported that at the last FOMC meeting, several of the Fed governors expressed reservations about the plan to maintain the size of the balance sheet, and roll over MBS into Treasuries.
There are a lot of moving parts to the story because there are different reasons for the objections. Some of the Fed governors are hawkish (like Hoenig). Some are more dovish (like Bullard). And some think that the Fed can’t really do anything because our problems are more structural (Kocherlakota).
But here’s what folks are taking away from the article: The Fed is still way behind the curve in terms of how bad the economy is. It’s paralysed.
It’s funny, because this is the exact opposite of what some people initially thought — there was this fear that the Fed knew something about bad news coming down the pike that the public hadn’t heard yet. In fact, as we now know, the Fed isn’t seeing what everyone else is.
Anyway, this is the talk of the morning, and it’s helping send stocks down close to another 1%.
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