Decisão do FOMC

O melhor comentário que vi da reunião do FOMC (aqui):

The Fed has come in for a surprising amount of criticism since its decision in the fall of 2010 to launch a new round of monetary easing — Quantitative Easing 2.  Ben Bernanke and his colleagues are right not to give in to these attacks.

 Critiques seem to be of four sorts. (Some are mutually exclusive.)

Uma delas:

4)  “The Fed is firing a volley in a destructive international currency war.”   This is the criticism that has come from some of our trading partners:  in particular, China, Germany and Brazil.   I don’t generally do “My country, right or wrong.”   But my country is right on this one.    The colorful “currency wars“ seems to have confused some people.  The current situation is precisely the point of floating exchange rates:    when some countries feel that their high unemployment calls for monetary expansion (US) at the same time that others feel that their overheating dangers call for monetary tightening (Brazil, India, Korea, China…), an appreciation of the latter currencies against the former is precisely the way that floating rates accommodate the differences.    This is why Milton Friedman favored floating rates, so that each country could pursue its own desired policies independently.   I realize that US monetary easing puts pressure on countries like China that they consider unwelcome. China is finding it increasingly difficult to cling to its exchange rate target by means of controls on capital inflows and sterilized foreign exchange intervention.   But capital flows are a far more legitimate way to let China feel the pressure than the alternative:  Congressional threats to impose WTO-inconsistent tariffs on Chinese imports if it won’t allow faster appreciation of the yuan.

A grande novidade foi que, depois de 1 ano consecutivo de voto contrário de Hoenig, não houve dissidência!

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5 thoughts on “Decisão do FOMC

  1. Joäo, a mí lo que me ha sorprendido es la de veces que citan su mandato: 4 veces directmente (mandate),2 veces por definición del mandato (maximun employment & price stability). Explicatio non petita?

    • In today´s WSJ article (about which I´m preparing a post), Taylor says the “norm” should be “long run price stability within a clear framework of economic stability”. But that´s just mincing words. I suppose most people would interpret “economic stability” as “acceptable level of unemployment” (which is the same as “maximum employment” as stated in the ongoing mandate)! Maybe some crackpot will remeber (as I do) that during the Great Depression, in 1936 when unemployment was down from the 25% peak but still a hefty 17.2%, the Fed embarked on a restrictive MP. All in the name of “price stability” (and then, the price level was slowly rising from the 1932 low but was still far below 1929 levels! )

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