US Needs More 'Juice' — From the Fed: Economist

Federal Reserve
Federal Reserve

While stocks fell off again Wednesday, following the Fed's gloomy view of the recovery on Tuesday, two market watchers on CNBC focused instead on how to 'juice' the economy.

“I think the Fed should be talking up the economy. The [Fed] policy is appropriately positioned,” John Ryding, founding partner and chief economist of RDQ Economics, told CNBC Wednesday.

“What’s holding the economy back isn’t the Fed balance sheet, it isn’t interest rates,” he added.

“What’s holding the economy back in job creation is the prospect of tax hikes next year and government regulation, and it’s fiscal policy that needs to address the growth issues, not monetary policy.”

Ryding said the best way to grow the economy is to offer incentives, not to lower the cost of the capital.

(For a contrarian view, read: “Fed Action Is Positive for Markets: Trennert”)

One problem is that the burden of stimulation rests on the Fed, because the “fiscal policy’s hands are tied,” Brian Fabbri, chief North American economist for BNP Paribas, told CNBC Wednesday.

“They need to make a move because fiscal policy is doing things in dribs and drabs—a little bit more money for the unemployed, a little bit more money for the state and local governments to keep a few teachers on balance,” he said.

“We need juice,” added Fabbri, “and we need it to come, I guess, from the Fed.”

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Disclosure information was not available for Ryding, Fabbri or their companies.