The President of the Philadelphia Fed Charles Plosser said earlier today that the Federal Reserve’s bond-buying program will not benefit growth or employment. Plosser is a non-voting member this term, but his comments have put into question QE3 as they come from a Fed member.
He has not been the first board member to criticize QE3, but even critics such as the Dallas Fed President Richard Fisher who is also a non-voting member mentioned that he would have voted against it, but that QE3 would be “less impactful”. Plosser is saying that it will have no impact.
The most damaging quote for the QE3 program is the following:
â€œI opposed the Committeeâ€™s actions in September because I believe that increasing monetary policy accommodation is neither appropriate nor likely to be effective in the current environment,â€ Plosser said. â€œEvery monetary policy action has costs and benefits, and my assessment is that the potential costs and risks associated with these actions outweigh the potential meager benefits.â€
In deep contrast to Plosser’s comments is another non-voting Fed member. Minneapolis Fed President Narayana Kocherlakota stated that the Fed needs to keep rates near zero until unemployment is back to 5 percent.
Protests in Spain to oppose Austerity measures could stop the EUR/USD rally beyond whatever strength Plosser comments had on the European currency. The interesting thing to note is that sometimes proposing the austerity measures and the ensuing protests are more damaging to the currency, than what sometimes happens when the government caves to the pressure. Case in point Portugal. When a new tax was proposed for government workers the protests forced the government to abandon that plan and look for new ways to meet the deficit goals.