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Tag Archive: Federal Open Market Committee


As Federal Reserve Chairman Ben Bernanke’s tenure draws to a close, these are the top 10 take away from the last night :blog

1.    Janet Yellen voter to taper

2.     Taper nothing more than symbolic – $10B split between Treasuries and MBS

3.     Fed changes forward guidance – Low rates now appropriate “well past the time that the unemployment rate drops below 6.5%”

4.     Bernanke believes FOMC will taper QE probably at each meeting, $10B each time with end of QE before 2014 year end Continue reading

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The Monetary Policy drama

Everyone interested in the world economy should watch Bernanke‘s recent speech and the press conference:

FED 2

FED 2 (Photo credit: Wikipedia)

 (Switch to full screen, it works well). Here is the base URL which collects together all the materials about the Fed’s announcement. The `exit strategy principles’ are in the June 21-22, 2011 meeting. 

The announcement reinforces the sense that the US economy is healing. The US Fed is keen to have inflation of 2% and believes the NAIRU is around 6.5%. Hence, once they come into the range where unemployment has achieved a few strong improvements and is trending to get below 6.5%, while price stability has not been compromised in that inflation expectations are still at 2%, they will start unwinding the extreme expansionary stance of monetary policy that has been in place in recent years. All through, there is no fixed calendar about what the Fed will do when. There is a clear articulation of the decision rules that will be employed, about how future data releases will generate future policy. 

Why did the world see this badly? Continue reading

I do not know why but somebody wanted me to define some basics on Yield spreads, that whether Yield spreads can nick-leesonjudge the risk environment in an economy ?

Yield spreads are good tools to judge the risk environment in an economy a lower yield spread means that the issuer of debt is in a situation to demand loans at a lower spread above the yield of government security which in turn shows the presence of ample liquidity.

As far as economic growth is concerned a lower yield spread indicates greater amount of liquidity available for growth and entrepreneurial practices as well as a negative impact on the front of inflation. Continue reading

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