Sunday 17 December 2017

Roubini says Fed monetary policy 'too little, too late'

New York University professor Nouriel Roubini. Photo: Bloomberg News
New York University professor Nouriel Roubini. Photo: Bloomberg News

Kevin Costelloe and Deirdre Bolton

Federal Reserve policymakers are unlikely to take steps toward further monetary easing at a meeting next week and may wait until November, New York University professor Nouriel Roubini has said.

Members of the US Federal Open Market Committee (FOMC) are divided over whether to renew large-scale asset purchases, a strategy known as quantitative easing, Mr Roubini said in a Bloomberg Television interview yesterday.

"The Fed is not going to move next week. They're going to move maybe in November because the latest data have been slightly better than expected," he said.

"Eventually they're going to get to QE, but it's going to be probably too little and too late," Mr Roubini added.

Manufacturing in August expanded at a faster pace than forecast as factories added workers and cranked up production, a September 1 report from the Institute for Supply Management showed.

Private employers increased payrolls by 67,000 last month, exceeding economists' estimates, according to a report from the US Labour Department on September 3.

The FOMC meets on September 21. Goldman Sachs and Pacific Investment Management project US central bankers will start buying government debt as soon as this year to prevent what they see as a 25pc chance of the economy slipping back into a recession.

"I don't think that monetary policy at this point is effective," said Mr Roubini, who forecast the recession more than a year before it began in December 2007. "The banks are not going to lend extra money," he said.

The 10-year Treasury yield was 2.71pc in New York last night, up from 2.68pc on Wednesday.

The Standard & Poor's 500 Index rose 0.3pc to 1123.89.

Referring to the 1.6pc US annual growth rate in the second quarter of this year, Mr Roubini said the economy may be reaching a "stall speed" and put the odds of a renewed recession at 40pc.

"All the tailwinds that supported growth in the first half are becoming headwinds," Mr Roubini said.

"We know that the second half is going to be worse than the second quarter."

Mr Roubini expressed doubts about the effectiveness of Japan's first intervention in the foreign-exchange market since 2004.

"The size of intervention matters" as well as co-ordination, Mr Roubini said.

"In this case, the Bank of Japan went alone."

He added that "usually uncoordinated intervention is less effective than co-ordination".

Mr Roubini said "the fundamental trends might lead to an appreciation of the yen further."

Yesterday, the yen tumbled past 85 a dollar for the first time in two weeks, trading at 85.56 at 2:08pm in New York.

Irish Independent

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