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I'm struggling to think of what the Fed can even do in this situation. I guess they can either 1) dig themselves deeper into a hole and issue another round of
by roymurdock 11y ago
I'm struggling to think of what the Fed can even do in this situation.
I guess they can either 1) dig themselves deeper into a hole and issue another round of QE to inject liquidity into the markets or 2) do absolutely nothing. Though they are probably loathe to do nothing as then it would seem like they don't have a solution.
Whatever happens, it will be an interesting/exciting time in non-traditional monetary policy that will generate a ton of academic papers going forward.
- rquantz 11y agoWell, at this point everyone is expecting them to raise rates, so not raising would, in effect, be doing something.
- jayess 11y agoAbout all they have left is more QE. My guess is that the next step in this bubble they've blown (along with the rest of the world's central banks) is massive deflation.
- meatysnapper 11y agoHonestly, I expected inflation for the last 6 years, but we haven't seen it. However, prices are creeping up nicely, in all the desirable places. Is that really that different?
- knowaveragejoe 11y agoI think they can safely do nothing and go along with the correction narrative, whether or not that's true.
- skylan_q 11y agoThe fed is paying interest to the banks for excess reserves they have parked at the fed. If they lower the interest rate they're paying out on the excess reserves, banks might move some of that money out of the fed and into other investments.
- AnimalMuppet 11y agoAt the moment, there's nothing that they need to do. A one-week drop of 15% in the stock market is not actually something that the Fed needs to fix.