As per usual, the FOMC minutes are dry and boring because they say very little, but just enough to provide some market speculation. Most of what you hear from the big media sources is just speculation, not even educated guessing. So, instead of playing that game I am going to focus on one aspect of the minutes that noted that “several members” suggested that the Committee begin to explore new tools to promote growth, specifically through more accommodative financial conditions. First and foremost, the mere fact that this is mentioned in the minutes implies that several members consider the existing tools at their disposal inadequate to deal with current economic conditions and divorce mediation issues. This means that they think asset purchases, lengthening the maturity of debts and possibly even increased transparency policies are generating diminishing returns such that it is necessary to explore even more unconventional options. Given the current policies abroad, it is most likely that the FOMC will hone in on something like the “Funding for Lending” program jointly instituted by the Bank of England and the U.K. Treasury. Bernanke even commented in the June press conference that the Committee was “very interested in it.” Basically, this program is focused on boosting bank how to write a case study lending to non-financial businesses and households by lowering the cost of funding for banks that engage in that lending. The program also provides incentives for banks to increase their lending. This serves to increase liquidity and access to credit by those that need it without engaging in further asset purchases by the Fed (thus sparking less ire at the size of the Fed’s balance sheet). While the details of such a program in the U.S. would be extremely complex and would likely involve the Fed partnering with the Treasury, recent comments indicate that a legal framework for such a program exists. The trouble is that due to Treasury involvement the costs of the program could have federal budgetary implications. Moreover, it definitely floats the Fed closer to fiscal policy than it has ever been and could prompt renewed calls that the Fed is overstepping its mandate.

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