Fed gets transparent on inflation
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Fed gets transparent on inflation
TESS VIGELAND: The Federal Reserve Open Market Committee starts another two-day meeting to talk interest rates tomorrow. The smart money says we’ll get another quarter-point increase. Which means, of course, that the smart money’s about to get more expensive. And some analysts are even predicting a half-point bump. For those of you keeping track, it would be the 17th rate hike in a row. Fed officials have made it pretty darn clear lately they intend to stay tough on inflation. Maybe even a little too clear? Here’s Marketplace’s Amy Scott.
AMY SCOTT: Last time the Fed met, something refreshing happened: Debate. Economist David Jones says such signs of democracy were rare during the Greenspan years.
DAVID JONES:“There was a whole range of options discussed at that meeting, everything from no change in Fed policy, which would have been a surprise to the markets, to a half-percentage point rate hike.”
But in the last few weeks, voices from the Fed have grown more unanimous . . . and louder. Each time Ben Bernanke or a Fed governor gives a speech, their inflation warnings seem to get scarier. That’s made another rate hike this time around seem all but certain. Analysts have been begging for more transparency from the Fed for years. But economist Jim Paulsen sounds almost wistful for the 1970s . . .when the minutes from Fed meetings weren’t even published till months later.
JIM PAULSEN:“What we learned in school was that the Fed didn’t say anything ever. So it’s come far cry today where almost every day there’s a Fed official speaking somewhere. I’m not sure which one’s better.”
Bernanke certainly got a lesson in the power of speech last month, when a dinner party chat with a CNBC anchor sent the markets tumbling. Paulsen says analysts would do better to watch the data than to dissect every remark.
PAULSEN: “People can worry about what the Fed thinks and what they say, and what they may do, but I still think at the end of the day, it’s really not the Fed that’s driving it. It’s the economy.”
And if the economy keeps chugging along like this, Paulsen says you can bet interest rates will keep rising.
In New York, I’m Amy Scott for Marketplace.
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