Neutral Bias? Apparently so, according to the political pundit Robert Novak, in an otherwise cogent piece titled A Rate Cut on Hold.
Unfortunately for Novak, the Fed is not at a neutral bias. (Remind me: Does WaPo actually still have editors?)
If the US Central Bank’s most significant policy position are the Fed Fund Rates, than the second most significant element of their policy is the bias of their statements (Let’s say Repos are a close 3rd — tho it may appear otherwise more recently).
My issue with Novak is that the Fed isn’t Neutral — their statements have all-too-clearly clearly been biased towards fighting inflation:
"Before the recent global financial crisis began, the Federal Reserve Board under Chairman Ben S. Bernanke was ready to take a subtle step toward easier money in order to stave off U.S. recession fears. Ready for approval was a new Federal Open Market Committee (FOMC) statement ending the central bank’s neutrality and putting it on a bias for an interest rate cut. But international credit scares changed all that." (emphasis added)
Other than getting that small factoid wrong — and as we have seen from Novak’s prior work, getting significant facts wrong is never a bother — this is a fine, fine piece of writing . . .
A Rate Cut on Hold
Robert D. Novak
Thursday, August 16, 2007; A15