A big leap forward: New York Fed Dudley points to monetary policy errors.

I know… but couldn´t resist, not with this about turn by a major figure!

William Dudley, the president of the Federal Reserve Bank of New York, gave a speech on Monday to the National Association for Business Economics, an organization for academic and applied economists. What made the speech particularly remarkable was Dudley did something the Fed almost never does: He disagreed with the consensus opinion of economists.

Dudley said he saw tight money as a major reason for the sluggishness of the economic recovery. “Monetary policy, while highly accommodative by historic standards, may still not have been sufficiently accommodative given the economic circumstances,” Dudley said. In adding it to a roster of conventional explanations — such as the natural consequence of recovering from a financial crisis and fighting global economic headwinds — Dudley stepped out of line with the vast majority of his fellow economists.

In a recent Economist poll of top U.S. economists, a majority said that monetary policy was “not important” to answering the question of why the recovery has been slow. Less than 10 percent of economists saw it as “very important.” Many of the surveyed are members of the NABE, perhaps even in attendance to hear Dudley tell them they’re wrong.

That´s important, but still only half of the necessary recognition because further on we learn that:

Nor was the speech a full mea culpa. Dudley took no responsibility for the downturn itself in the way that Chairman Ben Bernanke famously blamed the Fed for the Great Depression. His other explanations for the weak recovery, moreover, put him safely in agreement with most economists.

At least the ‘current misdeeds’ are being recognized. As history shows it would be too much to expect a full blown mea culpa.