July 29, 2013

IT'S A DEFLATIONARY EPOCH:

Federal Reserve 'Doves' Beat 'Hawks' in Economic Prognosticating (JON HILSENRATH and KRISTINA PETERSON, 7/29/13, WSJ)

Predicting the direction of the U.S. economy with precision is impossible. But the Fed must forecast growth, inflation and unemployment to guide its decisions on interest rates. Central bank miscalculations--when the Fed pushed interest rates too low or too high--have historically turned problems into catastrophes, fueling the Great Depression, for example, and the wealth-eroding inflation of the 1970s.

The Wall Street Journal examined more than 700 predictions made between 2009 and 2012 in speeches and congressional testimony by 14 Fed policy makers--and scored the predictions on growth, jobs and inflation.


The most accurate forecasts overall came from Ms. Yellen, now the Fed's vice chair. She was joined in the high scores by other Fed "doves," policy makers who wanted aggressively easy money policies to confront a weak U.S. economy and low inflation. Collectively, they supported Fed Chairmen Ben Bernanke's strategy to pump money into the U.S. economy.

The least accurate forecasts came from central bank "hawks," those who feared Fed policies would trigger rising inflation.


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Posted by at July 29, 2013 5:30 AM
  

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