It´s a very sad state of affairs when the economy´s future hinges on a single word: “PATIENCE”.
If it stays after next week´s FOMC Meeting, many say the Fed will lose “credibility”! Give me a break, as if the Fed had any so-called “credibility” left.
The Fed is rudderless, compass less and directionless! It wonders aimlessly, grabbing on straws, sometimes on the “financial stability” straw, lately on the “NAIRU” straw. All in support of a decision to begin raising rates as soon as possible.
They say the “see” inflation climbing back to the 2% target. That´s a feat, given that for the past 20 years the only thing affecting “inflation” fluctuations has been the gyrations in commodity and oil prices, and the mean inflations have been a little below the recently “official” 2% target! In fact, since then, they have been trending in the “wrong” direction. Also, between mid-2004 and mid-2008, a period of strong and persistent positive oil price shocks, core PCE inflation was on average only a bit less than 2.2%!
All this is widely known, maybe not to some FOMC Members.
The irony of it all is that since Bernanke became Chairman a little over nine years ago, the Fed said it would strive to be “transparent” and “communicate” as well and clearly as possible. The opposite has happened, with the Fed becoming “opaque”, “confusing” and mostly “inaudible”.
The toll this exacts, not only on the US economy, is high, certainly not worth a few basis points in interest rates to satisfy the “Machiavellian preferences” of some of the “high priests”!