“Market Bailouts and the FED ‘put’”- FED’s Poole Speaks
St. Louis FED President Poole’s speech today in Washington D.C. focused on the relationships between the stock market and expansionary policy by the FED. He noted that there can be no moral hazard when overall well being of the economy is the goal; a gain in stock markets is merely a function of economic wellbeing. Poole was as bold to say there is and should be a FED “put”, but only because stock market relief is an unintended but predictable byproduct of the FED’s conformity to its mandate to ensure full employment. Poole’s comments seem to be mowing down any hawkish notions of “moral hazard” going toward future FOMC rate decisions. As a result today’s comments may be indicative of a coming FED rate cut in Dec. As Poole clearly stated - if the FED monetary policy is aimed at price stability and full employment then there can be no moral hazard.