"Several participants emphasized that the Committee should be prepared to vary the pace of asset purchases, either in response to changes in the economic outlook or as its evaluation of the efficacy and costs of such purchases evolved. For example, one participant argued that purchases should vary incrementally from meeting to meeting in response to incoming information about the economy.
A number of participants stated that an ongoing evaluation of the efficacy, costs, and risks of asset purchases might well lead the Committee to taper or end its purchases before it judged that a substantial improvement in the outlook for the labor market had occurred.
Several others argued that the potential costs of reducing or ending asset purchases too soon were also significant, or that asset purchases should continue until a substantial improvement in the labor market outlook had occurred.
A few participants noted examples of past instances in which policymakers had prematurely removed accommodation, with adverse effects on economic growth, employment, and price stability; they also stressed the importance of communicating the Committee’s commitment to maintaining a highly accommodative stance of policy as long as warranted by economic conditions.
In this regard, a number of participants discussed the possibility of providing monetary accommodation by holding securities for a longer period than envisioned in the Committee’s exit principles, either as a supplement to, or a replacement for, asset purchases...
Similarly, one member raised a question about whether the statement language adequately captured the importance of the Committee’s assessment of the likely efficacy and costs in its asset purchase decisions, but the Committee decided to
maintain the current language pending a review, planned for the March meeting, of its asset purchases...
Ms. George [Kansas City Fed] dissented out of concern that the continued high level of monetary accommodation increased the risks of future economic and financial imbalances and, over time, could cause an increase in inflation expectations.
In her view, the potential costs and risks posed by the Committee’s asset purchases outweighed their uncertain benefits. Although she noted that monetary policy needed to remain supportive of the economy, Ms. George believed that policy had become too accommodative and that possible unintended side effects of ongoing asset purchases, posing risks to financial stability and complicating future monetary policy, argued against continuing on the Committee’s current path."
FOMC, Fed Minutes, January 2013
Stocks dropped hard today, albeit from a lofty height reached with few corrections. The trend is not yet broken.
The cause was said to be the release of the January Fed minutes, which suggested that QE will not be everlasting.
I think the correction was as much concerned about the lack of serious work being done in Washington about the sequester, and in particular to address a broken economy.
But in reality the stock market was reaching into bubble territory, with complacency at an extreme. And the economy has simply not caught up with pricing. And it may not for some time.
Forecasters keep reaching for the ever receding recovery. And I think it will keep receding, because of the policy error of the Federal Reserve and the Treasury in supplying stimulus to rescue bankers and traders from their own mismanagement and speculation, without performing their most imporatant obligations to the public and the real economy.
The cynical nature of Washington these days is hard for most people to understand. Those political denizens of the Beltway just do not care, judging by their servile attention to special interests, and preoccupation with personal enrichments and power. It is probably the tail end of a long running trend, culminating in the rise of a generation which has suckled on the gospel of greed.