NY Fed's Dudley: Nothing is on Auto Pilot

It's my job to repeat this as applied to the Fed's MBS purchase program. Remember this JDA classic?

Also, the Fed is done buying Treasurys. I'm not sure what happens now, I'm fairly sure it involves them still buying Treasurys.

Recycle that. The Fed is done buying MBSs. I'm not sure what happens now, I'm fairly sure it involves them still buying MBSs. Natch.


A top Federal Reserve official said Thursday he's worried about the weakness of the economic recovery but doesn't think it will slip into another recession.

William Dudley, president of the Federal Reserve Bank of New York, said in an interview with The Associated Press: "I think we do have a sustainable economic recovery."

But he added: "I'm less confident how strong that recovery will be." The odds that the economy will fall back into recession "are low, but not zero," he said.

To energize the recovery, the Fed has pledged to hold interest rates at record lows for an "extended period," which some analysts say means at least six months.

Dudley said that with unemployment high and factories operating well below capacity, the Fed can be "quite patient" before reversing course and raising rates.

The New York Fed chief also left the door open to a possible extension of an emergency program aimed at driving down mortgage rates and bolstering the housing market.

The Fed is on track to end its $1.25 trillion purchases of mortgage securities at the end of March. If the economy were to turn much weaker than expected or if mortgage rates were to sharply rise, it could prompt the Fed to extend the program, Dudley said.

Dudley likened the situation to the Fed driving a car.

"If there's a sharp turn in the road," the Fed will adjust course. "Nothing is on automatic pilot," he said.

Actually, if we're going to liken the Fed to a car, we should liken it to the one in Thelma and Louise that goes flying off the cliff. Whatever.

I will agree with Dudley when he insists the Fed can be "quite patient". So patient, in fact, that they'd sit quietly on the train tracks waiting for the train to smash them to bits. Wait, isn't that what they're doing?

Look out, boys, I think that light at the end of the tunnel is actually the 4pm express to Hyperinflation right on schedule.

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.


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