Saturday, February 4, 2012

The Truth about Bernanke's Absurd Forecasts into 2014

With the latest jobs numbers and other data showing the Fed manipulated economy improving. WSJ points out the absurdity of the Fed claim that the Fed is going to keep rates "near zero" until late 2014:
A few more months of strong jobs reports like the one released Friday, and the Federal Reserve might need to draw up a new game plan. For now, though, Fed Chairman Ben Bernanke seems unlikely to rewrite his script for the central bank.

The Fed said after its Jan. 25 meeting that it expected to keep short-term interest rates pinned near zero until at least late 2014, an ultra easy-money policy meant to spur borrowing, spending, investment and broader economic growth.
In the January 26 issue of the EPJ Daily Alert, I quoted the Fed:
To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.
And then wrote:
Of course, it is absolutely absurd for the Fed to claim that it will likely maintain the current low Fed funds rate "through late 2014". The Fed may not realize it but price inflation is breathing down its neck and the dollar appears ready to nose dive.
WSJ doesn't know how far off base the Fed is with its claim that it will keep rates "exceptionally low" into 2014, but at least it is beginning to see that the claim is already looking shaky. The Fed's absurd statement on January 25 as to what they see as their policy position in late 2014 is clearly indicative of how clueless the Fed really is, when WSJ is questioning, with good reason, their statement only days after it was made.

Think about it. What the hell does the Fed really understand about the economy, if they put out guidance into late-2014 that they are going to keep rates exceptionally low and days later in early-2012 the guidance looks absurd?

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