The increasingly repeated assumption in the aftermath of this past Friday’s jobs report seems to be that this is what was needed to push the Federal Reserve over the edge for another round of monetary policy-induced stimulus.
On the one hand, the thinking behind the assumption seems unassailable: With Congress unable or unwilling to use fiscal policy to give the economy a boost and businesses and consumers mostly continuing to stay on the sidelines, the Fed is the only game in town.
But, on the other hand, the Fed has been repeatedly warned by congressional Republicans over the past year not to stick to its economic knitting by focusing just on inflation and not to do anything to boost GDP . As I’ve posted before, having eliminated any chance that fiscal policy will be used as a tool to enhance the recovery and boost Barack Obama’s reelection chances, the GOP is trying to make sure that the only other tool available to do that — monetary policy — also isn’t available.
So…with bullseyes painted squarely between his eyes and on his back, the question is whether Bernanke with have the testicular fortitude to push for some version of monetary policy stimulus now, or will he decide that the best way to protect the Fed is to wait until after the election?