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Fed Out of Firepower?  More Stimulus Needed: Economists

Last week an ex-FOMC member stole the spotlight, although likely at least partially at the behest of the current Federal Reserve Chairman Jay Powell, who seems to have kicked off an economist-run pro-stimulus messaging campaign a few weeks ago at the National Association of Business Economists (NABE).  Former New York Fed Governor William Dudley penned a provocatively and ominously titled Op-Ed in Bloomberg; "The Fed Is Really Running Out of Firepower." The message to policymakers is clear. 

The article's gist is that while there are still some tools that the Fed has left unused, like yield-curve control or more asset purchases, even the most extremely dovish of these is unlikely to move the needle on the economy without significant fiscal stimulus. The Fed's lending power doesn't work very effectively without complimentary spending power. As Mr. Dudley put it, "Easy money encourages people to buy houses and appliances now rather than later. But when the future arrives, that activity is missing [without fiscal stimulus]." 

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