Tags: Fed | Bernanke | FOMC | Bullard

NYT: Is Bernanke Providing TMI (Too Much Information)?

Image: NYT: Is Bernanke Providing TMI (Too Much Information)?

By Nancy Stanley and Glenn J. Kalinoski   |   Tuesday, 25 Jun 2013 10:56 AM

While Federal Reserve Chairman Ben Bernanke's comments regarding the economy and the central bank slowing its program of quantitative easing (QE) after the Federal Open Market Committee (FOMC) meeting last week produced a plunge in stocks, it also has some questioning whether the Fed is giving out too much information.

In a press conference after the meeting, Bernanke said, "the Committee currently anticipates that it would be appropriate to moderate the monthly pace of purchases later this year; and if the subsequent [economic] data remain broadly aligned with our current expectations for the economy, we would continue to reduce the pace of purchases in measured steps through the first half of next year, ending purchases around midyear."

However, he added, "If things are worse, we would do more. If things are better, we will do less."

Editor's Note:
Economist Warns: ‘Money From Heaven a Path to Hell.’ See Evidence.

"It wasn't that long ago that any Fed chairman hardly said a word," The New York Times noted. In fact, until 1994, the central bank did not regularly issue a statement regarding a policy change following a meeting.

"[Former Fed Chairman] Alan Greenspan made an art out of talking in circles so that investors couldn't divine his intentions," according to The Times.

Bernanke's communications strategy, however, has worked magnificently in some instances.

"By laying out a timetable for the Fed's stimulus back in January 2012 — in which he explained the Fed's inflation and unemployment targets — he found a way to create a relative calm in the markets," The Times reported.

"Communication is indeed influencing the markets now. Whether it is too much of a good thing will only truly become apparent down the road," The Times stated.

During Bernanke's news conference, he was asked if his comments went beyond what the committee had agreed on.

"There's no change in policy involved here. There's simply a clarification, helping people to think about where policy will evolve. So, it was thought that it might be best for me to explain that to this group," Bernanke told reporters.

"The purpose of central-bank transparency was to give markets clarity and reduce volatility," Ed Yardeni, president and chief investment strategist at Yardeni Research, told Bloomberg two days before the Bernanke news conference.

"Instead, it's increasing volatility and been counterproductive. Clearly the backup in bond yields and sell-off are disconcerting."

Bernanke's comments led St. Louis Fed President James Bullard, who dissented with the FOMC decision, to publicly question the FOMC allowing Bernanke to announce the approximate timeline for tapering QE.

In a statement, Bullard, who believes the FOMC should signal more strongly its willingness to defend its inflation goal in light of recent low inflation readings, said he "felt that the committee's decision to authorize the chairman to lay out a more elaborate plan for reducing the pace of asset purchases was inappropriately timed.

"A more prudent approach would be to wait for more tangible signs that the economy was strengthening and that inflation was on a path to return toward target before making such an announcement."

Editor's Note: Economist Warns: ‘Money From Heaven a Path to Hell.’ See Evidence.

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