{"id":23434,"date":"2017-04-03T14:42:34","date_gmt":"2017-04-03T19:42:34","guid":{"rendered":"http:\/\/olduvai.ca\/?p=23434"},"modified":"2017-04-03T14:42:34","modified_gmt":"2017-04-03T19:42:34","slug":"yellens-balance-sheet-baloney","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=23434","title":{"rendered":"Yellen’s Balance Sheet Baloney"},"content":{"rendered":"
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YELLEN\u2019S BALANCE SHEET BALONEY<\/a><\/h3>\n<\/div>\n<\/header>\n
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Of the many questions reporters asked Janet Yellen on Wednesday, at her press conference<\/a>\u00a0following the FOMC\u2019s decision<\/a> to raise the Fed\u2019s policy rates, my favorite was the very first, posed by the Financial Times<\/em>\u2018 U.S. Economics Editor, Sam Fleming.<\/p>\n

Here is Mr. Fleming\u2019s question:<\/p>\n

[You\u2019ve stated that the Fed wants to delay*] balance sheet normalization until [interest rate*] normalization is well under way. Could you give us some sense about \u201cwhat well under way\u201d means, at least in your mind \u2014 what kind of hurdles are you setting, what kind of economic conditions would you like to see, is it a matter of the level of the short term federal funds rate as being the main issue? What kind of role do you see the role of the balance sheet playing in the mobilization process over longer term? Is it an active tool or passive tool? Thanks.<\/p><\/blockquote>\n

And here is Chair Yellen\u2019s response:<\/p>\n

Let me start with the second question first. We have emphasized for quite some time that the committee wishes to use variations in the fed funds rate target or short term interest rate target as our key active tool of policy. We think it\u2019s much easier, in using that tool, to communicate the stance of policy. We have much more experience with it, and have a better idea of its impact on the economy. So, while the balance sheet asset purchases are a tool that we could conceivably resort to if we found ourselves in a serious downturn where we were again up against the zero bound, and faced with substantial weakness in the economy, it\u2019s not a tool that we would want to use as a routine tool of policy.<\/p><\/blockquote>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

YELLEN\u2019S BALANCE SHEET BALONEY Of the many questions reporters asked Janet Yellen on Wednesday, at her press conference\u00a0following the FOMC\u2019s decision to raise the Fed\u2019s policy rates, my favorite was the very first, posed by the Financial Times\u2018 U.S. Economics Editor, Sam Fleming. Here is Mr. Fleming\u2019s question: [You\u2019ve stated that the Fed wants to […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[49,7380,303,4512,15079,451,15080,3650],"class_list":["post-23434","post","type-post","status-publish","format-standard","hentry","category-economics","tag-balance-sheet","tag-cobden-centre","tag-fed","tag-fomc","tag-george-selgin","tag-janet-yellen","tag-sam-fleming","tag-us-federal-reserve"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/23434","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=23434"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/23434\/revisions"}],"predecessor-version":[{"id":23435,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/23434\/revisions\/23435"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=23434"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=23434"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=23434"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}