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May 04, 2005

Fedwatching

Mark Thoma gives us TIm Duy's thoughts on the Fed:

Economist's View: WSJ: Fed Sees Inflation as Biggest Threat: Tim Duy, a colleague of mine, offers his thoughts.... Before coming to the UO, Tim was an International Economist at Treasury and a Fed Watcher for The G7 Group, a private consulting firm....

Tim says:

On balance, FOMC members want to drop the term 'measured.' They do not want to step up the pace of rate increases. They want instead to have more flexibility about policy. This has always been a problem with the statement - it is often difficult to back off of a critical catch phrase.... The Fed is trying to dissuade investors from concluding that the Q1 growth slowdown is significant enough to dissuade their rate rising campaign. Critics will claim the Fed is ignoring potentially disastrous underlying economic imbalances, and that rising rates threaten to trigger a financial crisis (see DeLong's piece on hard-landings). But the Fed is always behind the curve. I would be surprised to see any shift in the course of policy prior to the Q2 GDP release in July.

Posted by DeLong at May 4, 2005 02:35 PM