Weak Jobs Report Will Keep More Fed Easing on the Table

From NY Fed President William Dudley: The Road to Recovery: BrooklynOn the national economy:[E]conomic growth so far this year has been disappointing. Real GDP in the first quarter of 2011 grew at a tepid 1.8 percent annual rate, and the available data suggest that growth in the current quarter will not be much better.

Matteo Radaelli submits: Our estimates on U.S. economic data due for release during the next week:Chicago PMI (Monday, Jan. 31), ISM manufacturing index (Tuesday, Feb. 2) – Both the Chicago PMI and the ISM manufacturing index rose in December – to 66.8 and 57 respectively – confirming that the short term outlook for the industrial sector remains positive.

BofA Merrill Lynch economist Ethan Harris has been banging the table about the risks that disinflation (falling, but positive inflation) pose to Federal Reserve monetary policy for a while now. As the chart below shows, several measures of inflation are trending lower on a year-over-year basis. With each new data release, it seems like the amount of annual inflation in the United States economy is moving further and further away from the FOMC's 2% target.

By Daryl Montgomery: Quantitative easing is off the table for the Fed at the moment because of Friday's GDP report. According to the Commerce Department U.S. second quarter GDP growth was 1.5%, which is mediocre, but not bad enough to justify another round of money printing stimulus.

By Tim Duy: While financial market participants continued to sell Treasury bonds thinking that the Fed is out of the game, New York Federal Reserve President WIlliam Dudley gave no indication to suggest that either QE3 was off the table or just around the corner.