Little Evidence Monetary Policy Affects Demand, Says Montier

Investors are eagerly awaiting the latest Federal Open Market Committee (FOMC) minutes for the April 28-29 meeting due out later today for some indication on when we should expect the first rate hike, attempting to divine the future from the exact choice of words used to describe the economy. But James Montier, a member of the asset allocation team at GMO, argues that we’ve become way too obsessed with monetary policy.

“There is precious little evidence that monetary policy matters for the major components of demand (investment and consumption look pretty immune to the shifts in interest rates over time). Perhaps it is time to recall that we have another tool in our economic kit: fiscal policy,” he writes.

Montier...

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