Quantitative Easing is likely ending in October. That from Dallas Fed President Fisher, who is often the loan monetary hawk at the Fed. From Reuters:
Richard Fisher, one of the Federal Reserve's most ardent policy hawks, said on Tuesday he would favor ending the U.S. central bank's massive bond-buying program in October, but said he does not expect the Fed to start raising interest rates until next year.
"The odds are slim" of a rate rise immediately after the bond-buying program is ended, Fisher, president of the Dallas Federal Reserve, told Reuters in a telephone interview.
"I don't expect we'll raise short-term rates this year," said Fisher, who is a voting member of the Fed's policy-setting committee this year.
That's probably true, but we'll see if the economy cooperates with that scenario. Because while the Federal Reserve can set interest rates lower to try to stimulate the economy, hiking interest rates is a reaction to something bad happening in the economy i.e. inflation.
And guess what? The Fed doesn't get to determine what the inflation rate is.
And we have seen some evidence that the inflation rate is picking up, albeit, not convincing evidence yet. But we rarely see inflation picking up until it's upon us.
It would be ironic that if at the end of QE the money supply created by QE caused inflation to get so out of control that we skipped the whole recovery phase of the economic cycle and went right back to recession.
Ironic, but not totally surprising.
That's always been the concern of guys like Fisher, and frankly myself.
While I think there's some benefit in manipulating interest rates in order to improve the money supply to get the economy going, the policy overhang from politics in Washington as been the most severe drag on the economy. And that's not changing anytime soon.
Fisher's comments are nothing more than informed speculation at this point.
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