For my money the most interesting piece of Fedspeak today was some coded support for further easing from John Williams of the San Francisco Fed. Mr Williams wasn’t exactly gung ho, but his words were fairly clear.

“Right now, though, the real threat is an economy that is at risk of stalling and the prospect of many years of very high unemployment, with potentially long-run negative consequences for our economy. There are a number of potential steps the Fed could take to ease financial conditions further and move us closer to our mandated goals of maximum employment and price stability. Of course, these “treatments” won’t make our economic problems go away and their costs and benefits must be carefully balanced. But they could offer a measure of protection against further deterioration in the patient’s condition and perhaps help him get back on his feet.”

Mr Williams also set out an economic forecast that is notably grim on unemployment. He forecast 2 per cent annualised growth in the second half of 2011, but unemployment above 9 per cent at the end of this year, and most importantly, above 8.5 per cent at the end of 2012. Mr Williams also referred to ‘stall speed’ implying that he sees plenty of downside risk. You would certainly want to ease with that forecast. Read more