Tags: Fed | policy | job | market

MarketWatch's Kellner: Fed Policy Can't Cure Job Market's Ills

By Dan Weil   |   Tuesday, 26 Aug 2014 05:55 PM

Monetary policy can't do much to clear up the weak employment picture, says MarketWatch chief economist Irwin Kellner.

"It is always possible to rev up the economy to the point where it overheats," he writes on the news service. "This might create a few more jobs at the risk of generating a rise in the rate of inflation." 

Where is job growth going to come from? Kellner asks.

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Federal Reserve Chair Janet "Yellen had no answer [in a speech Friday] other than to suggest that monetary policy will remain easy," he says. "Actually, monetary policy is about as easy as it can get." 

The Fed has kept its federal funds rate target at a record low of zero to 0.25 percent since December 2008.

But, "even if there was room to ease, the literature tells us that monetary policy alone is not the best, most efficient way to boost economic growth," Kellner writes.

"Monetary policy is good at restraint, while fiscal policy is what is needed to boost growth.... Fiscal policy must do the heavy lifting via tax cuts and spending increases."

Meanwhile, Fed policy earns less approval from economists now than it did six months ago and a year ago, according to a new survey of 257 members of the National Association for Business Economics.

A total of 53 percent of respondents believe monetary policy is on the right track, down from 57 percent in February 2014 and August 2013. A total of 39 percent think Fed policy is too stimulative.

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Monetary policy can't do much to clear up the weak employment picture, says MarketWatch chief economist Irwin Kellner.
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2014-55-26
 

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