Tags: Baker | Fed | ease | now

Economist Baker: Fed Must Act Now; Dollar Should Be Devalued

By    |   Friday, 03 Aug 2012 07:42 AM

The Federal Reserve shouldn’t wait to ease monetary policy further, says Dean Baker, co-director of the Center for Economic and Policy Research.

He also says the Fed and Treasury should push the dollar down to shrink the nation’s $558 billion trade deficit.

As for domestic monetary policy, the Fed pledged Wednesday to “provide additional accommodation as needed.” It’s needed now, Baker tells Yahoo.

Editor's Note: The Truth About the Economy — Government Documents Lead to Eerie Conclusion

“We’re sitting here with 8.2 percent unemployment, and their [the Fed’s] assessment of the economy isn’t more optimistic than anyone else’s. They expect slow growth through the rest of the year—the unemployment rate likely staying at 8 percent or higher,” he says.

“You would think that would call for more action. So I’m a little at a loss to understand what exactly they’re waiting for.”

Baker isn’t pleased with the dollar’s recent rally, saying a devaluation is essential. “We need to get the trade deficit closer to a balance. The way to do that is get the dollar down.”

Some experts warn that a weak dollar could trigger inflation. Baker isn’t worried. The economy’s weakness makes inflation “so far from that being an issue.”

Not everyone agrees with Baker that the Fed can have much impact on the economy with further easing.

“The Fed is recognizing the economy is a bit weaker, but there’s not that much it can do,” Michael Strauss, chief investment strategist at Commonfund, tells Bloomberg.

Editor's Note: The Truth About the Economy — Government Documents Lead to Eerie Conclusion


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