Just when I was starting to the market was finally comfortable with the notion of ongoing, steady reductions by the Fed in the size of its monthly asset purchases, there have been just the smallest signs of edginess in today’s price action.
President of the Dallas Federal Reserve Richard Fisher was speaking today at the University of Texas in Austin and said that that Fed has provided ‘more than enough’ easing to aid the economy. Mr Fisher, who is a voting member of the FOMC this year, thinks the Fed should press on with its tapering, laying the blame for slow growth at the feet of the government.
He said, ‘It is my firm belief that the fault in our economy lies not in monetary policy but in a reckless and feckless federal government that simply cannot get its fiscal and regulatory policy geared so as to encourage business to take the copious amount of money we at the Fed have created and put it to work creating jobs and growing our economy. US stock indices hit their lows of the day less than hour after Mr Fisher started speaking.
Coincidentally, the Fed published full transcripts today of all its 2008 FOMC meetings, a period that spans the worst of the financial crisis. In January 2008, just as the US economy was poised to enter recession, Mr Fisher dismissed what he called ‘tales of woe’ as being anecdotal evidence, calling Newsweek’s ‘Road to recession’ cover story a ‘contra-indicator’, and saying his discussions with 30 CEOs pointed to slowing not recession. ‘The expectation is not to be negative,’ he said back then. ‘My CEO soundings indicate pretty much what we have forecast as a group: much slower growth, not necessarily a recession.’
Yesterday we saw an encouraging result from Markit’s manufacturing PMI for February. The complementary non-services PMI is published next Monday, and it will be interesting to see if this report also finds expansion in spite of this year’s heavy weather.