Fed meetings are typically boring and uneventful. But there was news today at the Federal Reserve.
Not about interest rates — they’re still at zero. Sunday’s the fourth anniversary of the Fed’s zero interest rate policy.
No, the news today was on the other end of the bargain: how and when the Fed’s going to decide to raise rates. For the first time, the central bank has put a number on its policy decisions.
Bernanke said he’s going to keep interest rates at-or-near zero as long as unemployment’s above 6.5 percent, and inflation’s 1.5 percent or less.
It’s kind of a big deal because up ’til now, the Fed’s guidelines for when it was going to raise or lower interest rates has pretty much been: “Umm…we’ll let you know when we feel like it. Maybe a year, year and a half from now…whatever.”
The Fed chairman had other things to say today, of course. The questions and answers went on for an hour or so. And they give us the perfect segue to another edition of the Fiscal Cliff Time Machine.
Our guest, of course, is Ben Bernanke. Your job is to decide which piece of tape is from this year and the fiscal cliff and which is from last year and the debt limit fight.
Here you go, Choice 1:
“In particular it will be critical that fiscal policymakers come together soon to achieve longer-term, fiscal sustainability without adopting policies that could derail the ongoing recovery.”
And choice 2:
“The most helpful thing that I think Congress and the administration could do right now is find a resolution that on the one hand achieves long-run fiscal sustainability, which is critical — absolutely critical — for a healthy economy, but also avoids derailing the recovery, which is currently in process.”
Okay, trick question. They’re both from today.
But honestly, most of what Ben Bernanke says does kinda sound the same anyway, don’t you think?
And one final note, at one point today Bernanke was asked what he thought of the phrase “fiscal cliff.”
“I think it’s a sensible term because I think of the fiscal policies providing support to the economy,” he said. “If fiscal policy becomes very contractionary, the economy will, I think, go off a cliff.”
Not surprising he likes the phrase, seeing as how he’s the guy who thought of it.
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