Salient to Investors:

FRB Governor Jeremy Stein said:

  • Diminishing returns from Fed purchases of Treasurys indicate it should instead buy mortgage-backed debt – corporate borrowers can already secure inexpensive credit.
  • A strategy of deliberately seeking higher inflation to spur economic growth would be a mistake and take the Fed away from one leg of its dual congressional mandate to maintain stable prices and ensure full employment: consumers and businesses may not react to higher inflation the way that they do in economic models.
  • Fed policies may be causing banks, insurance companies and pension funds to take on more risk to get higher yield.

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