Fed To Pull Back This Week
Fed expected to reduce monetary stimulus this week. NYT: "The Federal Reserve’s policy-making committee, which meets Tuesday and Wednesday, is widely expected to cut the Fed’s monthly purchases of Treasury and mortgage-backed securities by $10 billion ... and to end the purchases entirely later this year ... A thornier question is what the Fed should say about short-term interest rates. The Fed’s stimulus campaign is based on convincing investors that rates will remain low. But Fed officials are increasingly uncertain of how much longer to hold rates near zero, and how quickly to raise rates thereafter."
Interest rates may be permanently kept "below historic averages" reports Bloomberg: "While neither central bank has plans for increases any time soon, improving economies are spurring debate about the appropriate levels for neutral interest rates, which neither stimulate nor slow growth ... 'Most people agree that potential gross-domestic-product growth is lower than before the crisis and will continue to be lower for at least a few more years,' so central bank benchmark rates also will be lower, said [economist] Torsten Slok..."
Whatever the real unemployment rate is, Fed should keep stimulus, argues TNR's Danny Vinik: "There’s a big debate playing out right now at the Federal Reserve ... Is the unemployment rate correct? ... [Some say] the traditional unemployment rate ... is deceiving because it only counts those who are actively looking for work ... [Others] believe the traditional unemployment rate is in fact representative of the state of the labor market [even though] the long-term unemployed have become fully disconnected from it ... No matter which point of view the Fed subscribes to, it should keep its foot on the gas ..."
China eases currency controls, reports AP: "China announced on Saturday a modest easing of exchange rate controls that have been criticized by Washington and other trading partners ... The range in which the tightly controlled yuan is allowed to fluctuate against the dollar each day will double in size, though to a still relatively narrow 2 percent ... The relatively small size of Saturday's change appeared unlikely to mollify Beijing's foreign critics. Some U.S. lawmakers have demanded punitive tariffs on Chinese goods if Beijing failed to ease controls, but the White House has resisted imposing sanctions."
What Was Paul Ryan Thinking?
Rep. Paul Ryan, intentionally or not, is race-baiting, argues NYT's Paul Krugman: "...why do they say such things? Because American conservatism is still, after all these years, largely driven by claims that liberals are taking away your hard-earned money and giving it to Those People ... conservatives are still, in effect, mobilizing against the bums on welfare even though both the bums and the welfare are long gone or never existed ... What does [Ryan's poverty] report have to say about the impact of falling real wages? It never mentions the subject at all."
"Is Paul Ryan Racist?" asks Politico's Ian Haney López: "Perhaps Ryan genuinely did not recognize the racial narrative embedded in his remarks about an inner city culture that devalues work. But at best, this suggests that Ryan has uncritically adopted the charged rhetoric of his party without understanding its racial undertones."
Details of Senate Housing Finance Bill Released
"Senate Draft Bill Seeks to Wind Down Fannie Mae in Five Years" reports Bloomberg: "The bill would sell off the companies’ assets and replace them with government bond insurance that would kick in only after private capital suffered significant losses ... [Senators Tim] Johnson and [Mike] Crapo said they took the 'rare action' of releasing bill language on a weekend 'to balance the committee members’ interests in having adequate time to review the legislation while advancing housing finance reform in a timely manner.' Senator Elizabeth Warren, a Massachusetts Democrat, said on March 13 that the issue is 'too important to rush.'"
Five-year timeframe is flexible, notes The Hill: "The five-year deadline is flexible and could stretch beyond the 10-year mark, if needed. Essentially, the legislation dims the lights at Fannie and Freddie instead of cutting off power on a specific date. But the bill includes built-in political deadlines to push the transition to completion within, at least, that decade-long timeframe."
