The Fed Widens the Easing Door

Today, the Fed widened the door further toward easing monetary policy (presumably in the form of additional quantitative easing). The Fed's shift rests on a weaker outlook for growth (investment appears to have started to slow again, too), limited prospects for a pick-up in employment, combined with inflationary pressures below its target. It does not however make it at all clear what would prompt it to "take the plunge" and actively ease. The key passage in today's Federal Open Market Committee (FOMC) statement is as follows: "The Committee ... is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate." The lone dissenter continued to be Kansas City Fed President Thomas M. Hoenig, who did not support additional easing because he judges that the economy is recovering at a moderate pace anyway.