Greg Ip, whom I have criticized in the past for being too trusting of government statements and news releases, has the scales removed from his eyes:
Fed pause coming and this time, we mean it — right?
Did Bernanke hint at a pause in rate increases in his Congressional testimony this week? The markets certainly think so, but a reality check might be in order. We checked our coverage of the last seven months and concluded that since the Fed started hinting of a pause, it’s raised rates four times. Here are The Wall Street Journal’s headlines in that period:
Dec. 14: Neutral Point May Be Near As Statement Leaves Room for a Pause in the Increases
Jan. 4: Fed Suggests It’s Close to Ending Run of Rate Rises
Feb. 1: Fed Lifts Rate by Quarter Point, Casts Doubt on More Increases
April 19: Fed Hints Next Rate Increase Could Be the Last for a While
April 28: Bernanke Hints at a Pause in Rate Increases
May 11: Central Bank Cites Worries Of Inflation Amid Growth, But Hints of a Possible Pause
July 20: Dow Surges as Markets Take Fed Chief’s Remarks as Hint Rate Increases Are Near End
To be sure, those were just hints — the Fed never said when, or whether, it would pause, and some of those hints clearly applied to a period beyond the next meeting.
That said, the fact there has been no break in the tightening cycle in spite of all the hints to the contrary serves as a useful reminder that no matter what the Fed says, or what we think it says, circumstances change, and the Fed must act accordingly.
Better watch out, Greg — they’ll brand you a cynic if you keep up that reality based stuff . . .
Fed Reality Check
WSJ, July 20, 2006, 9:45 am