Dudley says Fed should 'take out some insurance' this week
US stocks are at a record high but that isn't slowing down the doves.
Former New York Fed President Bill Dudley writes today that policy makers should lower rates again on Wednesday.
He writes about 'narrative economics' and the historical pattern that unemployment either it goes up by less than a third of a percentage point, or it goes up by 2 percentage points or more.
The idea is that a shock like a trade war hits and people start to worry and hold-off on spending. That can be a self-fulfilling prophesy.
This danger bolsters the argument for the Fed to ease monetary policy at this week's meeting of the Federal Open Market Committee. Such a preemptive move will reduce the chances that the economy will slow sufficiently to hit stall speed. Even if the insurance turns out to be unnecessary, the potential consequences aren't bad. It just means that the economy will be stronger and the inflation rate will likely move more quickly back toward the Fed's 2% target.
It's tough to take this seriously when he was imploring the Fed to hold rates a few weeks ago in order to discipline the President.
