Friday Post #2: A rational voice from the US Federal Reserve

Earlier this week the US Federal Reserve Chairman Bernanke announced that the Fed would be keeping the historic low emergency level interest rate supressed for another 2 years!

Curiously the members of the Federal Open Market Committee (which is what Ben Bernanke is Chairman of) had 3 members who cast dissenting votes on taking this action.

To have this many dissenters is somewhat unheard of.

And today one of those dissenters, Minneapolis Fed's Narayana Kocherlakota, issued a statement as to why he thought the policy was a horrendous idea:

• " I dissented from this change in language because the evolution of macroeconomic data did not reflect a need to make monetary policy more accommodative than in November 2010. In particular, personal consumption expenditure (PCE) inflation rose notably in the first half of 2011, whether or not one includes food and energy. At the same time, while unemployment does remain disturbingly high, it has fallen since November. I can summarize my reasoning as follows. I believe that in November, the Committee judiciously chose a level of accommodation that was well calibrated for the prevailing economic conditions. Since November, inflation has risen and unemployment has fallen. I do not believe that providing more accommodation - easing monetary policy - is the appropriate response to these changes in the economy."

This comes as consumer confidence has plummeted to a level not seen since May of 1980!!!

What's worse is that consumer inflation expectations are unchanged as expectations of inflation are becoming cemented in the consumer mindset.

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