Fed Musings

By now everyone knows that the Fed is standing to and leaving interest rates on hold. Of particular interest to me was their official statement. While the economy is slow right now, the outlook for inflation is far from clear. Rising energy and food prices could sneak their way into the core CPI numbers that the Fed watches so closely.

Of equal interest was the substance of the vote. Dallas Fed president Richard Fisher dissented and voted for a rate increase. The regional bank presidents are getting more powerful as the Board of Governors shrinks. This is happening because the Bush administration can’t get its nominees past a resistant Congress.

This Fed is a far cry from the monolith that Alan Greenspan led. Bernanke’s style is to stimulate discussion and encourage dissent. While that tends to provide better outcomes over time, it can lead to more uncertainty in the short run.


Douglas R. Tengdin, CFA
Chief Investment Officer
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