Bill Dudley writes that the Fed is 'very near' the point where it can't do any more
Former New York Fed President Bill Dudley is highlighting a point that markets don't want to hear right now: The Fed is out of bullets.
He highlights that there are margin actions like more QE, forward guidance or even negative interest rates that are 'actions', the effect would be fleeting.
"Even if the Fed did more -- much more -- it would not provide much additional support to the economy," he wrote. "The rate on a 30-year mortgage stands at about 3%. If the Fed managed to push that down by another 0.5 percentage point, what difference would it make? Hardly any."
What's more, he said that low rates have boosted near-term equity prices at the expense of future returns. He estimates no more than 6-7% annually in the next decade, which will force people to save more for retirement and mean less spending.
His solution is for governments to do more and he said that the Fed needs to make that clear.
