The Ideal Fed Chairman Would Give Boring Speeches

Michael Giberson

Greg Mankiw explains why the increase in Fed watching could be a bad sign:

Perhaps increased Fed watching is inevitable whenever we have a new Fed chairman, but it is nonetheless troubling. Fundamentally, Fed watching is a symptom of ambiguity in monetary policymaking. Fed insiders do not have significantly more data on the economy than everyone else. When financial markets react to Fed statements, therefore, they are not incorporating news about the economy. Instead, they are incorporating news about policymakers’ intentions. So if a speech or testimony by a Fed official moves financial markets, it means that the intentions of monetary policymakers were not clear before the speech or testimony.

Mankiw concludes, “The ideal would be a completely boring Fed chairman whose speeches are regularly ignored by financial markets. Apparently, we are not there yet.”

I think by expanding his idea a bit, we could come up with a description for the ideal Congress, too.


One thought on “The Ideal Fed Chairman Would Give Boring Speeches

  1. Mike,

    Congress is a bit of a mixed bag: they’ve got the boring speech thing down to a science; but, the “Left Tributary Media” only ignore the conservatives, while showcasing the liberals of either party. The Massachusetts Senate delegation is a case in point: both incredibly boring; and, both “liberally” quoted in the LTM. Also, look at the frequency with which Susan Collins and Olympia Snow, Lincoln Chafee and other liberal “Republicans” are quoted in the LTM.

    The media, like the markets, will not ignore legislators who take the positions the LTM feeds them and parrot them back, as long as there are some “sound bites” which are judged quotable.

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