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Wednesday, June 20, 2012

SBE Council Chief Economist on FOMC Statement

Raymond J. Keating, chief economist for the Small Business & Entrepreneurship Council (SBE Council), issued the following response to the Federal Open Market Committee's (FOMC's) statement on June 20:

"The FOMC's historically unprecedented accommodative stance on monetary policy continues. In fact, the loose money policies that began in the summer of 2008 are projected to remain in place at least through the end of 2014.

"As we have seen for nearly four years now, the impact on economic and employment growth has been nonexistent. That's consistent with what should be expected, since the effects of expansive monetary policy, if it has any positives for the economy, will be very short term.

"Unfortunately, over the longer haul, loose money merely creates a vast amount of uncertainty about the future of inflation and the value of the dollar. For example, when the Fed gets loose, the value of the dollar is affected, as are inflation expectations, which in turn push up the price of oil and gas at the pump.

"It turns out that the Fed has been bailed out on the dollar by things being worse elsewhere, such as in Europe. In addition, concerns about the economies in Europe and China have provided an added breather on energy prices recently.

"Finally, this uncertainty about monetary policy adds to the worries that entrepreneurs, small businesses and investors already have regarding tax and regulatory policies. This toxic combination puts a brake on risk taking, and therefore, on economic growth and job creation."

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