FOMC: “Fiscal Policy is Restraining Economic Growth”

Traders signal offers in the S&P 500 stock index options pit at the Chicago Board Options Exchange prior to remarks from the Federal Reserve on May 1, 2013 in Chicago, Illinois.

Photo by Scott Olson/Getty Images

If you want evidence that the Federal Reserve would not offset the pro-growth impact of looser fiscal policy, you need look no further than today’s FOMC statement, which offers no change of policy but a clear statement that “fiscal policy is restraining economic growth“.

Beyond that, no real change of policy or statement. It continues to be curious to me that the Fed is willing to accept levels of inflation below what they say is desirable, even as the labor market continues to be weak. The view appears to be that there are mysterious and hard to quantify risks of more aggressive monetary policy, so instead the Fed will call for looser fiscal policy and promise to not offset it. The Fed isn’t staffed by dummies, though, and they must know perfectly well this isn’t going to happen.