The idea is, if I have understood correctly, that the Riksdag Committee on Finance or some part of it – a special stabilisation policy committee – would be given a greater role, with an analysis function and the authority to implement discretionary fiscal policy decisions when necessary. I have no faith in this idea, for several reasons. One fairly obvious reason is that a stabilisation policy committee would of course face the same difficult problems as the Riksbank and the government with regard to predicting the future. The fact that inflation is currently low is largely due to surprisingly positive surprise shocks that were not predicted by any analysts, rather than to the Riksbank making assessments that deviated from others or holding back demand. Difficulties in predicting and fine tuning the economy are something that everyone entering this field will face and scarcely a good reason for establishing a new public body. Another important reason for my doubts towards this proposal is connected with the leading principle for reforming monetary policy, namely that it should be formulated "at arm's length" from the current party politics. From what I understand of the proposal, the idea is that these problems will be managed by setting rules in advance that will indicate the situations in which discretionary fiscal policy measures shall be implemented and phased out. Of course, one can have different opinions as to how successful this might be.
However, the uncertainty around this expectation is large – at $ billion it is almost as large as the entire size of the large-scale asset purchases announced in November 2010 or the Maturity Extension Program announced in September 2011.6 This likely reflects uncertainty about how the economy will evolve and how the FOMC will adjust its purchases in response to changes in the economic outlook or the costs and benefits of the policy. Implementation of the current asset purchase program In implementing the current purchase program, the Desk has operated in a similar manner as in past programs. As always, outright purchases in Treasuries and agency MBS are conducted through operations that seek to acquire securities at competitive prices while minimizing any market disruptions. There are some key differences between our Treasury and MBS operations that I would like to discuss. As counterparties in our operations, you know that outright purchases of Treasury securities are conducted through large-scale, multiple-security auctions via the Desk’s FedTrade platform, which allows all primary dealers to place multiple offers across all eligible securities simultaneously. Purchases of MBS, on the other hand, are currently conducted using TradeWeb, a commercial trading platform.7 The platform allows buyers to solicit offers for one security at a time from up to four counterparties, so the Desk includes dealers in operations on a rotating basis. As a result, the Desk purchases MBS in a series of smallerscale, more frequent auctions.