Some at Fed Are Urging Pre-emptive Stimulus

From the N.Y. Times: Some Federal Reserve officials are reviving an idea that rose and fell with Alan Greenspan, the former Fed chairman, as they seek to persuade colleagues to take new action to stimulate growth.

Former Fed chairman Alan Greenspan argued that the Fed should do more than its forecast suggested. His idea of "taking out insurance" is now being revived by Fed officials who are advocating for pre-emptive stimulus.  Central bankers generally set policy based on their judgment about the most likely path for the nation’s economy. But Mr. Greenspan argued that the Fed sometimes should do more than its forecast suggested, buttressing the economy against large, potential risks. He described such moves as “taking out insurance.”

On the eve of the Fed’s policy-making committee meeting on Tuesday and Wednesday, members who favor additional action argued that the likely path of the economy was itself sufficient reason for action. The committee predicted in June that without new measures unemployment would fall slightly, if at all, in the second half of the year.

Read all about it at http://www.nytimes.com/2012/07/31/business/some-at-fed-urge-pre-emptive-stimulus.html?_r=1&ref=global&gwh=0BBE9E846DDBD2AE7216372A514FCE9B