Tags: Paulsen | Fed | leave | alone

Paulsen: Fed Should Leave Well Enough Alone

By    |   Monday, 06 August 2012 04:03 PM

When the Federal Reserve decided against implementing a new round of quantitative easing last week, many experts said the economy’s struggle makes it only a matter of time before the Fed moves again.

But James Paulsen, chief investment strategist at Wells Capital Management, thinks the central bank would be best off letting the economy rebound on its own.

“Nothing is exactly what they should be doing right now,” he tells The New York Times.

Given that the Fed has loosened its monetary spigots for more than four years with limited success, “it’s time to let the economy take care of itself,” Paulsen says.

Other experts say that statistics like the paltry 1.5-percent second-quarter gross domestic product growth and the 8.3 percent unemployment rate leave the Fed little choice but to act. That’s especially true with fiscal policy in a contractionary mode, they say.

But Paulsen places more emphasis on signs that the economy has bottomed, such as buoyant retail sales and signs of life in the housing market.

The economy’s self-healing process has begun, and the Fed should contemplate tightening rather than easing, he says.

Not many economists expect the Fed to follow Paulsen’s recommendation.

“They were as blunt as you can get without actually pulling the trigger,” Dan Greenhaus, chief global strategist at BTIG, told Bloomberg after the Fed’s meeting next week. “They’re saying, ‘Hey, things are not good and we’re an inch away from easing.’”

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Monday, 06 August 2012 04:03 PM
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