Fed Will Ease Monetary Policy This Week: Goldman’s Hatzius – [Have we reached the place where I dare say, "Oh, yeah?" ~Jean]

Published: Tuesday, 19 Jun 2012 | 12:08 AM ET
By: Jean Chua
Writer for CNBC.com

The U.S. central bank will most likely ease monetary policy when it meets this week as recent data point to a worsening labor market and the crisis in Europe intensifies, Goldman Sachs said.

Federal Reserve
The Federal Reserve headquarters in Washington, DC.

The Federal Open Market Committee will likely say it would buy assets such as mortgage-backed securities and U.S. Treasurys when it meets for a two-day meeting starting Tuesday, Jan Hatzius, the investment bank’s Chief U.S. Economist said in a report on Monday.

“We would be quite surprised if we saw no easing this week,” Hatzius wrote in the report.

The Federal Reserve [cnbc explains] may also extend Operation Twist, he added, although he does not find the “strategy very attractive.” The program – which involves the Fed selling medium-term bonds and using the proceeds to buy longer-term ones, such as 10-year Treasurys, effectively driving down longer-term interest rates – runs out at the end of June.

“We believe that an extension of Operation Twist could well be insufficient on its own and could thus be followed by additional easing action before long,” Hatzius said.

Instead, a “sufficiently large program” that involves mortgage-backed securities would help, he said, adding that while “it is unlikely to be very powerful, that doesn’t mean Fed officials shouldn’t do it.”

“The risk of inflation is remote, and even when it becomes less remote Fed officials should be easily able to tighten policy sufficiently,” Hatzius wrote.

In addition, the Fed could opt for unconventional means such as promising not to raise rates until the unemployment rate has fallen to a specific level and a nominal GDP level target, according to the report.

While analysts agree that the U.S. economy faces deep problems, not everyone is expecting measures beyond extending Operation Twist.

“I think it probably wants to save some bullets for later on in the year, once we get some clearer sense of where Europe is going and the impact that it has,” Rob Rennie, Global Head of FX Strategy with Westpac Bank in Sydney, told CNBC Asia’s “Squawk Box” on Tuesday. “So our expectations are only for an extension of Operation Twist, no more.”

Gerald Hanweck, Professor of Finance at George Mason University, said what’s more likely to happen is that the Fed would hold off on easing until the next meeting.

“I think the Fed has pretty much spent its bullets. It’s run out of steam; its QEs[cnbc explains] are having less and less impact on the real economy,” Hanweck told CNBC. “There are members who are really not in favor of having any more expansion, any more quantitative easing, including Operation Twist. So it is very likely that what might happen is they’ll put it off until the next meeting because they’re supposed to be done with the current operation Twist by the end of June.”

Tax cuts to help individuals and the corporate sector, as well as incentives to get businesses to invest are what will help the U.S. economy, Hanweck said. The Fed could also adopt “extreme” measures such as boosting demand for corporate bonds.

“It can buy, if it wants to go to an extreme, it can start buying short-term commercial paper. And that’s certainly one of the areas where it has an option. It’s an extreme option but they could do it,” he added.

- By CNBC’s Jean Chua.

© 2012 CNBC.com
This entry was posted in Financial/economic information, Illuminati/Terrorism/Corruption, Political and tagged , , , , , , , . Bookmark the permalink.

9 Responses to Fed Will Ease Monetary Policy This Week: Goldman’s Hatzius – [Have we reached the place where I dare say, "Oh, yeah?" ~Jean]

  1. Raine says:

    Gotta love that photo of Angela as well :)

  2. Balance says:

    They just dont care, they know that the American taxpayer is on the hook to bail them out, first we have to get rid of the politicians that are corrupt than perhaps we can see changes by the people for the people, wow what a concept…. wait is that not what our founding fathers brought to us in the constitution.

    • Stunned at Sunset says:

      Yes, dear Balance, however, our current politicians have all been subject to terminal myopia as a result of their graft and corruption having gorged themselves with undeserved wealth confiscated from the labor classes over the past 30 years. This terrible physiological condition subsequently led to advanced amnesia, the only cure for which is losing an election. Once safely and humanely ensconced in a retirement program of their own choosing, they will conveniently forget that they are citizens of this Republic bound by its customs and culture and answerable to the laws for which they had no small part in legislating.

      You can see how it all comes together–once you understand the depth of their depravity and the absolute and astonishing nature of their alien origins (my point being that they’ve all been living on the moon).
      :o

      • Alex says:

        It is sunset isn’t it?

        I am stunned as well.

        When I see a sunset.. I crack a cold one and kick my feet up.. ya know…enjoy the end of a good day.

        They scream…. they holler.
        They just won’t go to bed.

        Morning comes either way.
        The Dawn will come either way.

        I am stunned as well.

  3. Contramary says:

    Surprise surprise — I have never met you – SaS – so much in temper and passion – as your writing
    always seem to me much more on the C-C-C-Side (cool/calm/collected) – I love this side of yours!

    But you are right – so right – when letting off steam …this truly is a charade which they make of themselves, and if it were not for the involved 99% one could laugh one’s head off !!!!

    But as for the misery they have done to all of the 99% … it is too serious a case !
    Thank you, SaS, for making this so clear to all readers !

    I love you for this blow-out of temper and truth !
    Mary

    • Stunned at Sunset says:

      Thank you for your kind words, dearest sister,

      Jean just put up a post from Bix where Jamie Dimon is giving testimony before Congress. Here’s what I’m picking up on, the Republicans are asking him friendly questions and the Democrats seem somewhat hostile toward him. The bottom line though was expressed by Rep. Steve Stivers, R-Ohio who commented on the policy of “too-big-to-fail” saying that the policy is only as certain as the policy-makers are willing to make it.

      Rep. David Scott, D-Georgia mildly castigated him for a failure to observe the detail saying that J.P. Morgan’s loss was alleviated only because of the size of their portfolio. He suggested that, perhaps, banking entities such as J.P. Morgan should only be permitted to to conduct banking based on the investment position and not the aggregate portfolio.

      It’s always the same thing: these Big Dogs always are caught “unawares.” But, the big deal here is that Jamie Dimon exhorted Congress to do away, dispense, cease and desist the policy of “Too big to fail.” And, it’s on the record.

      Well now! When did Jamie Dimon finally accept “redemption?” I missed it. Someone in the family explain it to me.
      :o

  4. Stunned at Sunset says:

    General post,

    It’s called “Quantitative Easing.” It didn’t work before and it most certainly will not work this time either. We’ve been through two previous “QEs” that have brutally punished “savers” by stripping away the value of their personal savings both rich and poor alike. All this is is another round of Welfare for the super-rich bankers whose shenanigans have put them into a real bind in that they now “Owe the House” Quad-trillions in U.S. Dollars and Euros that the little people just don’t have the money to pay off for them (again). So, they’ll be “creating” their own money out of the cosmic either which, of course, will dilute the money supply further destroying our savings and devaluing our assets until we have nothing left.

    You know, little family, you would have thought they might have given us the time it would take to become prosperous so they could rob it all again and pay off their bad debts but, in their infinite wisdom (small “w”) they thought that they really couldn’t afford the time and energy.

    What a marvel of human intelligence these people are! They’ve set a trap for themselves and now have forgotten the way out of their own morass! Or, more pointedly, they refuse to take the only way out. They keep trying to do the same stupid thing over and over and over expecting different results. Now, dearest brothers and sisters, just what is that the definition of?

    Well, at least ONE of their manufactured prophesies is coming true! “Babylon The Great is fallen, fallen…must be tough to be a tyrant with no subjects or real property to destroy. Rev. Joe must be laughing right now. Just try to comprehend the value of their last statement in their negotiations with the opposition: “If you try to stop us from destroying the planet and everything on it, we’ll destroy the planet and everything on it!

    OH, REALLY?

    (1) Having nothing to lose, do you think we’re really worried about what happens to you guys?

    (2) You guys can talk the talk but you can’t walk the walk–that’s evidenced by all the trillions you’ve spent digging survival pits into the Earth. You’ve all been digging like deranged gophers for 50 years now because you don’t want “it” to happen to you, do you? That’s where your heads are: up your behinds and buried beneath the sands of time. Get real!

    (3) There are over 70,000,000 people on this Earth who just aren’t listening to any of your rhetoric any more. So, “Tales from the Garden of the Owl of wisdom”<–again small "w" just aren't able to manifest no matter how much any of you stamp your feet and howl obscenities. Go away! You make too much noise!
    :o

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