Ostensibly conflicting messages from Fed speakers… What’s with that?! Mixed signals from the FOMC can cause volatility, and mortgage rates are not fans of volatility in underlying markets.
When Dallas Fed Pres Fisher (non-voter) says stuff like: “We will not support further quantitative easing under these circumstances because there’s a lot of money lying on the sidelines, lying fallow,” and “I don’t see what more would do,” you have to wonder if he’s purposely trying to avoid tuning in to Bernanke’s messages from earlier this week.
At the first George Washington University lecture, Bernanke gave a history lesson, citing the failures of the central bank in the 1930’s that ultimately resulted in a major aftershock to the initial market crash preceding the Great Depression.
Bernanke said the Fed “did not use monetary policy to prevent deflation and the collapse in output and employment,” and “did not adequately perform its function as lender of last resort, allowing many bank failures and a resulting contraction in credit,” concluding, “We will want to keep these lessons in mind as we consider the Fed’s response to the crisis of 2008-2009.”
In short, Bernanke doesn’t necessarily disagree with the more hawkish Fed members on whether or not MORE QE is NEEDED (assuming economic metrics continue to hold or improve), but perhaps some of the more hawkish Fed members should do more to at least acknowledge that there’s an argument to be careful about pulling back too quickly that goes beyond the simple question of whether or not the economy is improving.