Unconventional Policy, Conventional Fed – Bloomberg 07-22-13

Salient to Investors:

Caroline Baum writes:

  • The Fed’s forecast for improved half2 growth is just that – we’ve been waiting years for stronger growth.
  • Many of the more hawkish Fed presidents have been uncomfortable with QE from the start, and are supported by little data on which to evaluate the short-term benefits versus the long-term costs. 
  • Torsten Slok at Deutsche Bank said Fed holdings as a share of total US publicly held debt is 15.1 percent, the same as it was in 2007 and lower than in 2003. However, by the end of 2013, the Fed will own 45 percent of the 30-yr bonds and 35 percent to 40 percent of 7- and 10-yr notes.
  • Despite all the unconventional Fed policies after the financial crisis, the Fed is conventional at heart, and uncomfortable with a $3.5 trillion balance sheet that’s still growing. Whether they have the tools to unwind it, or can hold assets to maturity is still a big unknown. 

 

Read the full article at http://www.bloomberg.com/news/2013-07-22/unconventional-policy-conventional-fed.html

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