No way to conduct monetary policy!



Patience isn’t a virtue when it is too-rigidly defined by markets.

Federal Reserve Chairwoman Janet Yellen testifies next week before Congress in one of her semiannual trips to Capitol Hill, giving investors another chance to obsess over when the central bank is likely to begin raising short-term interest rates. In addressing questions about the so-called liftoff, Ms. Yellen must take on two communication challenges.

The first is to soften investors’ interpretation of what will happen when the Fed drops the word “patient” from its post meeting statement. The general view in the markets is that once this occurs, a rate increase will follow two meetings later.

But as the Fed tries to regain a more normal monetary policy stance, it will surely want to get less specific in its guidance. The idea is that investors should be prepared for it to raise or lower rates at any meeting, as used to be the case before the current era of zero rates.

Re-establishing this mind-set is no easy task. As shown by minutes of the Fed’s January meeting, released this week, policy makers fretted that dropping the word “patient” would risk a shift in market expectations for tightening in an “unduly narrow range of dates.” That could cause sharp market moves.

Reminded me of this: 


Is an academic discussion of free speech potentially traumatic? A recent panel for Smith College alumnae aimed at “challenging the ideological echo chamber” elicited this ominous “trigger/content warning” when a transcript appeared in the campus newspaper: “Racism/racial slurs, ableist slurs, antisemitic language, anti-Muslim/Islamophobic language, anti-immigrant language, sexist/misogynistic slurs, references to race-based violence, references to antisemitic violence.”

No one on this panel, in which I participated, trafficked in slurs. So what prompted the warning?

Smith President Kathleen McCartney had joked, “We’re just wild and crazy, aren’t we?” In the transcript, “crazy” was replaced by the notation: “[ableist slur].”


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