Rookie Gaffe?

That’s what Paul Edelstein of IHS Global Insight thinks, according to The Wall Street Journal.  In the Fed’s post-FOMC presser last Wednesday, Fed President Janet Yellen suggested that interest-rate increases might start beginning roughly six months after the Fed’s QEx (which is in the process of being…tapered) ends or as soon as this fall.  Edelstein had this to say as the stock market reacted negatively to Yellen’s remarks:

This could have been a rookie gaffe on Yellen’s part.  This was, after all, her first press conference.

Or, it’s possible that Yellen knew what she was doing, and she said what she said with carefully chosen words.

It’s also possible that Yellen knew another thing that Edelstein and his ilk seem to have conveniently forgotten: the Fed exists to stabilize the economy’s price behavior and to work toward full employment, however that’s defined.  In particular, the Fed does not at all exist to prop up stock prices for the benefit of investors like Edelstein, or me.  Our performance—work with me on this, it seems to be a lost concept for many—is on us; it’s a part of our personal responsibility.

And we had to know that QEx would end, we do know that is ending, and we should know that it’s on us to deal with the inflation that will result on OEx’s completion.  The Fed has no obligation—it cannot have this obligation in a free market economy—to inure us from the outcomes of our decisions.

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