WSJ's Hilsenrath: Federal Reserve Maps Exit from Stimulus

This is really funny. What started as a joke on Twitter yesterday became real, sort of, today, as Jon Hilsenrath channels Federal Reserve (Dallas Fed Richard Fisher, in particular) and says the Fed has mapped out an exit strategy from its unprecedented easing of the past 4 years.

Mr. Kuroda of Bank of Japan, uh oh. My condolences, and best of luck holding the bag.

The news, for what it is worth still from the once-omniscient Hilsenrath, of course broke after the financial market is solidly closed for the weekend.

From Wall Street Journal (5/10/2013):

Fed Maps Exit From Stimulus
Timing of Wind-Down Is Uncertain, but Focus Is on Managing Unpredictable Market Expectations

Federal Reserve officials have mapped out a strategy for winding down an unprecedented $85 billion-a-month bond-buying program meant to spur the economy—an effort to preserve flexibility and manage highly unpredictable market expectations.

Officials say they plan to reduce the amount of bonds they buy in careful and potentially halting steps, varying their purchases as their confidence about the job market and inflation evolves. The timing on when to start is still being debated.

The Fed's strategy for how and when to wind down the program is of intense interest in financial markets. While the strategy being debated leaves the Fed plenty of flexibility, it might not be the clear and steady path markets expect based on past experience.

Officials are focusing on clarifying the strategy so markets don't overreact about their next moves. For example, officials want to avoid creating expectations that their retreat will be a steady, uniform process like their approach from 2003 to 2006, when they raised short-term interest rates in a series of quarter-percentage-point increments over 17 straight policy meetings.

"I don't want to go from wild turkey to cold turkey," Richard Fisher, president of the Federal Reserve Bank of Dallas, said in an interview Friday. "I think we ought to dial it back." Mr. Fisher is part of a contingent of Fed hawks who are wary of the central bank's easy-money policies.

...

Mr. Fisher said he advocated starting right away at the last Fed meeting. Some officials can envision taking a first step this summer, if strong data show the economy is weathering the tax increases and federal spending cuts that appear to be weighing on growth. But they might wait longer, especially if the economy disappoints, as it has for several years during the spring and summer months.

A Wall Street Journal survey of private economists this week showed that 55% expect the Fed to start shrinking its bond purchases in the third or fourth quarter this year, while 45% expect the Fed to wait until next year or later. None expected the Fed to increase its purchases as its next step.

(Full article at the link)

Dial it back. Just like that. The rich got way richer, the not-so-rich got poorer, says Pew Research; many lost all their assets in the form of home equities and even went into negative assets because of the foreclosure fraud by the major Wall Street banks. But what's that to the Fed? Nothing, as it is not their so-called mandate. Now these banks and hedge funds are landlords, having bought those houses on the cheap.

Dial it back. Really, Mr. Fisher.

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