The FOMC’s CacophonyCommentary by Bob McTeer
April 11, 2015
When Buddy Holly was little, he insisted on getting on the stage with his uncle’s band and playing along with his fiddle. The unpleasant screeching caused the uncle to wax Buddy’s bow. Buddy could still play, but it didn’t bother anybody.
Alan Greenspan used to wax my bow and the bows of the other Reserve Bank presidents on the speaking circuit. I got more than one telephone call from his senior staff purporting to be passing along his admonitions. I always suspected that they were speaking more for themselves than for the Chairman since they often objected to what I considered innocuous comments. The most frustrating involved my characterizing some recent economic statistic as good news or bad news. They seemed to think that gave away my inclinations regarding monetary policy. Oh, how the world has changed!
Yesterday, a colleague of mine wondered in an email, “What is it about the Fed and raising rates? They are addicted to it like a junkie is addicted to cocaine as the one answer to every situation other than outright depression.” I found it odd that he thought the Fed was addicted to raising rates since the last time it did so was June 29, 2006, almost nine years ago. He must have meant they talked about it too much.
This morning brought evidence of that. The Wall Street Journal’s Real Time Economics Newsletter posted five things to watch on the economic calendar. The first listed was Minneapolis Fed’s Kocherlakota saying the Fed shouldn’t raise rates in 2015.” He preferred the second half of 2016. The third listed was Richmond Fed’s Lacker repeating that he sees strong case to lift rates in June.
I’m not sure this public debate serves us well. Perhaps Janet Yellen should apply a little bit of wax.