Greg Ip has a problem with Kevin Warsh’s so-far performance as the new Fed Chair.

Warsh’s analogy of the Fed simply calling balls and strikes, borrowed from future Supreme Court Chief Justice John Roberts, doesn’t work. The Fed isn’t a neutral umpire, it is the most important player in the game.

I have a problem with Ip’s problem. He went on.

Markets respond not just to data but how they think the Fed will respond to data. Investors plug each new bit of information into the Fed’s assumed “reaction function,” which then spits out the appropriate interest rate.

That’s part of what needs to change: “markets”—which is to say investors and business management teams—need to respond to the actual economy, not what one or another arm of government (however independent or not that arm might be) is doing. They need to stop playing the ref so much and work from the economy a whole lot more. It’ll take a bit for them to learn that and then how to do that.

The Fed doesn’t have a role refereeing the markets, in any event. The Fed’s job is to maintain price stability and employment stability, which it does by setting its benchmarks at levels consistent with its long term inflation goal. Its role does not include manipulating the market’s response to those benchmark rate moves.