As the Federal Reserve Board’s Open Market Committee holds two days of meetings this week in Washington, global business executives at the Milken Global Conference are carefully watching the words and actions of the U.S.’s central bank – and are debating when the Fed will begin raising interest rates and reducing its enormous balance sheet.
While only one session at the Milken conference is devoted exclusively to the Fed, the past moves and future actions of the Fed have been a topic of frequent discussion at sessions dealing with the overall global economy.
Virtually all speakers have said they expect the Fed to continue tapering, leading to the conclusion of its aggressive bond buying program by this fall.
At a Tuesday morning session on the global economy, Ken Rogoff of Harvard, Nouriel Roubini of New York University and John Taylor of Stanford all spoke about the Fed.
Taylor continued his sharp attacks on Fed policies of recent years, saying the U.S. has had woeful monetary, fiscal and regulatory policies which have played a key role in the “terrible performance” of the American economy.
“Policy has screwed up royally,” Taylor said, adding that highly aggressive monetary policy has been misguided and unhelpful.
“I don’t think QE has worked,” he said.
Taylor said he assumes the Fed is heading toward “more normal policy,” adding “I think that’s what the Fed should do.”
Rogoff said that he believes the Fed is moving toward “more stable policy rules,” but added that he expects any federal fund rate increases to come later and then be implemented very gradually.
“I assume they (the Fed) are going to keep very easy monetary policy for quite awhile,” Rogoff said.
A separate panel Tuesday discussed the Fed’s communications strategy. Athanasios Orphanides, former governor of the Central Bank of Cyprus, said the Fed’s aggressive communications strategy represents a “sea change.”
But he added that sometimes a great deal of information can be confusing to markets. “You can overdo it,” he warned.