Tags: cato | Fed | political | bias

Cato’s Calabria: More Fed Easing Risks Charges of Political Bias

By    |   Tuesday, 05 June 2012 12:21 PM

Federal Reserve policymaking often turns dicey in election years, as the central bank doesn’t want to adopt policies that would favor one presidential candidate over another. That difficulty is particularly pointed this year, as the Fed decides whether to ease again.

“The Fed has got themselves in a situation where if they do anything really aggressive, I think they’re going to get absolutely accused [of picking sides],” Mark Calabria, director of financial-regulation studies for the Cato Institute, tells The Hill news service.

“They’re going to be part of the election, whether they like it or not.”

Editor's Note: You Owe It to Yourself to Know What Obama and Bernanke Are Hiding From Americans

Policy views among Fed policymakers themselves are quite mixed at the moment.

Some think they should contemplate easing soon to boost the sagging economy, some think they should wait for more weak data before acting, and others think they should be thinking about when to tighten policy rather than easing again.

Karen Dynan of the Brookings Institution tells The Hill that the Fed will be properly cautious in its decisions. “But I don’t think they will hold back from taking appropriate steps simply because of the election,” she says.

Credit Suisse expects the Fed to mildly extend its accommodation by continuing Operation Twist and continuing to buy mortgage securities.

"With the weak and slowing global and domestic economy and falling confidence, the case for a continuation of the current policy is very high," Ira Jersey, an interest-rate strategist for the bank tells Bloomberg.

Editor's Note: You Owe It to Yourself to Know What Obama and Bernanke Are Hiding From Americans

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Tuesday, 05 June 2012 12:21 PM
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