The Fed may opt for cheaper stimuluses

Marketplace Staff Oct 27, 2010
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The Fed may opt for cheaper stimuluses

Marketplace Staff Oct 27, 2010
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TEXT OF INTERVIEW

JEREMY HOBSON: Now to Richard Dekaser, economist with the Parthenon Group. He joins us live from Boston.

Good morning, Richard.

RICHARD DEKASER: Good morning.

HOBSON: Richard, the story everybody’s talking about this morning, in the Wall Street Journal. It says the Fed may actually pump less new money into the economy than previously thought. If that ends up being true, what’s the reason for it?

DEKASER: I think we’re in fine tuning mode right now and this contrasts with where we were from back — in say– November of 2008 and early 2009 when the economy was absolutely in crisis. Employment was in free fall. Now we’re looking at an economy that’s stabilized. It’s just not growing as quick as the Fed would like. So I think they’re likely to move incrementally and make it conditional upon economic outcomes as long as inflation is too low and unemployment too high, they’ll continue but if both those metrics get back where they’d like, the Fed will call it quits.

HOBSON: And we got durable goods numbers from the Commerce Department. These are big ticket items like refrigerators or computers that companies buy. They were up 3 percent in September. Is that good news?

DEKASER: Well, it is, but only on a qualified basis. Durable goods are important because it reflects business and consumer willingness to basically stick their necks out, buy these big ticket items. But the reasons for today’s big serge had almost entirely to do with aircraft orders — Boeing in particular reported a huge book of orders. When they do that screws the numbers. When you net that out you actually saw a modest decline so this brings us back to the Fed. These are the concerns that the Fed is trying to battle. Businesses and consumers are wary. The Fed’s trying to counter those forces, and that’s why they’re doing exactly what they are.

HOBSON: Richard Dekaser,thanks.

DEKASER: My pleasure.

HOBSON: Richard Dekaser, economist with the Parthenon Group.

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