Heads of the Federal Reserves of Atlanta, St. Louis and San Francisco this week have all expressed agreement on the fact that more stimulus – aka monetary accomodation - is needed for the US economy. John Williams (San Francisco), Dennis Lockhart (Atlanta) and James Bullard (St. Louis) – all voting members of the FOMC (Federal Open Market Committee) have indicated that the best way to protect the U.S. against the Euro crisis is to pump more money into the system.
U.S. inflation targets of 2%, apparently, are not quite being met, and unemployment levels have not improved sufficiently. This, coupled with ongoing and worsening uncertainty in Europe’s banking system have led James Bullard to call for more quantitative easing in order to keep the Euro mess from “washing up on U.S. shores.” Analysts have pointed to Australia – where inflation is right on target and unemployment is low – which is still lowering its own interest rates in order to enable such good growth rates to continue in the face of global headwinds.
For his part, Lockhart has said that the problems facing the US continue to be a weak housing market, develeraging in the financial sector, a shrinking government sector and the uncertainty with Europe. Lockhart also cited a slowdown in emerging markets as another risk facing the US economy. And of course, he suggests that the Fed needs to be ready to respond to any major form of global financial uncertainty and stability by being prepared to take the necessary monetary measures – aka, stimulus.
All in all, their reports tell us nothing new – we know more stimulus is coming – but they leave out the question of when, letting that depend on actions taken by Europe.-