Reply #45: Fed Minutes Offer More Confusion Than Clarity [View All]

[54anickel]

http://quote.bloomberg.com/apps/news?pid=10000039&refer=columnist_berry&sid=asJMgvXGEDiQ

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And then the minutes got to the messy part: What to tell the public about how the committee regarded the risks to sustainable growth and price stability.

After the previous six meetings, each statement had included this sentence: ``The committee perceives the upside and downside risks to the attainment of both sustainable growth and price stability for the next few quarters to be roughly equal.''

Last month, that sentence was changed to read, ``The committee perceives that, with appropriate monetary policy action, the upside and downside risks to the attainment of both sustainable growth and price stability should be kept roughly equal.''

That language presumably was in one of the draft statements presented to the committee by Chairman Alan Greenspan. The point of the new language, the minutes said, was ``to make the committee's assessment explicitly conditional on an assumption of appropriate monetary policy so as to underscore that maintaining balanced risks would require policy action.

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Unfortunately, the new wording has left the committee with a new problem. How on earth could the risks to sustainable growth and price stability ever become unequal? Wouldn't that be the same as admitting that even with ``appropriate monetary policy'' the Fed couldn't keep things under control?

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