““It’s hard to make a strong case” the Fed’s bond-buying program can now aid the economy through lowering rates, said Stephen Stanley, chief economist with Pierpont Securities. He said that leaves the Fed relying on the “secondary mechanisms” of monetary policy, most notably the trade benefits of a lower dollar. “They want to see [a dollar decline], although they’d never admit it publicly,” Stanley said.

More broadly, the Fed’s historic reluctance to comment on the dollar ignores a fundamental reality, says Tim Duy, an economics professor at the University of Oregon. Referring to the Fed/Treasury accord, he said “the idea there is this line” between the two authorities “is more of a policy construction than anything with real economic meaning.”” Read more.

“Central Bankers Give In, And Discuss the Dollar”
Michael S. Derby
Wall Street Journal, November 19, 2010.

Image by jscreationzs / FreeDigitalPhotos.net.