Fed meeting

Ten Questions About Today's Federal Reserve Meeting by Ygelsias 

6. So what's Woodford's argument? Part one for Woodford is that giving the economy a monetary boost is all about expectations, not about bond-buying. He thinks you boost the economy by telling people to expect faster nominal growth in the future—saying the Fed will give us faster real growth or faster inflation, but will absolutely refuse to countenance a slow-growth low-inflation combination. In that framework, QE is unnecessary.

7. But even if it's unnecessary, is it doing any harm? Yes, Woodford's view is that taking the bonds off the market is dangerous. Government debt plays a crucial role as a "safe asset" in the broader financial and economic situation. Public policy ought to ensure that this government debt is around in ample supply.

8. Doesn't that also imply that the budget deficit should be higher? Woodford hasn't said this, but it does appear to follow from his logic. For that matter, the Fed's own statement that it will tolerate inflation in the 2-2.5 percent range as long as unemployment stays high also argues for a higher deficit. It's a clear signal from the Fed that if fiscal stimulus gave the economy a boost, monetary policy wouldn't calm it down again. Either way you look at it, the government should be collecting less in taxes and doing more opportunistic investment. But the Fed can't make that stuff happen.