Rep. Kevin Brady (R-TX), Vice Chairman and top Republican on the Joint Economic Committee, strongly disagreed with the Federal Open Market Committee’s decision today to embark upon a new round of quantitative easing by committing to an open ended program to purchase $40 billion of agency mortgage-backed securities per month and extending the expected period of very low interest rates from the end of 2014 until the middle of 2015.
“Three years after the recession ended, more Fed stimulus at this late point appears more obligatory than reasoned. It’s also a stunning admission of the failure of President Obama to lead America back to a sustained economic recovery,” said Brady.
“As far as job creation goes the Fed is shooting blanks at this point, and the market knows it.”
At a time of historically low interest rates, trillions of dollars of excess commercial bank reserves parked at the Fed and with U.S. companies sitting on an equally large amount of cash, Brady says “it’s doubtful that another round of Fed stimulus will have much of an impact on the economy or the dismal employment rate.”
Time for Fed to Stop
The Fed’s latest action doesn’t address the real roadblocks to economic growth, says Brady, and only adds more uncertainty to the market. “It’s time for the Fed to stop. Chairman Bernanke should look President Obama and Congress in the eye and tell them the Fed has done all it can to boost the economy—and perhaps too much.”
“The Fed Chairman,” said Brady, “should state clearly and unequivocally that if the president wants stronger job creation now--before the election--then he should work with Republicans in Congress to remove the tax, spending, regulatory and health care roadblocks jackknifed across America’s economy now--before the election.”
“Monetary policy can’t solve what poor fiscal policy has created.”
Three-quarters of economists responding in the most recent Blue Chip Economic Indicators survey believe the Federal Reserve should not embark upon additional quantitative easing. Roughly two-thirds of those respondents believe that any such action would have little or no effect.
Recent work by Macroeconomic Advisers suggests that a large scale Fed bond buying program would result in an increase in GDP growth of only ¼ of one percent and also only serve to lower the unemployment rate by only about 0.2 percentage points over the next two years.
Rep. Brady is the sponsor of the Sound Dollar Act H.R.4180, which would replace the Fed’s current dual mandate with a single mandate for price stability.