This is the rumor I keep reading and hearing about in the last few days. In essence, the Fed would leave quantity unknown or open-ended. I’ve discussed this in the past, but it’s not enough to make a substantive economic difference. Remember, monetary policy is about price and not quantity. So if the Fed wants to substantially influence rates lower they would be better off naming a specific rate for the 30 year bond. Not doing this leaves only vague and uncertain transmission mechanisms to work here. Things like wealth effects, portfolio rebalancing, etc.
What’s looking certain is that they’re definitely not taking the line of thought I previously mentioned, which was to wait and see. But I guess we’ll know for certain in a few hours…..
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.