Some say monetary policy, like sausage, ought to be made out of sight. Former Fed chairman Alan Greenspan prided himself on being not so much Delphic as indecipherable in his pronouncements on central bank policy. Yet there was his successor, Ben Bernanke, in the Fed’s first-ever post-policy-meeting press conference last month, speaking in forthright, though professorial, terms about the bank’s steady-as-she-goes interest rate intentions.
The dollar may be sliding, the economy faltering and the bond markets fretting, but the Fed chief got the equivalent of a standing ovation from investors in stocks, particularly small caps. The Russell 2000 hit a new high. Still, one astute observer of monetary policy — comedian Stephen Colbert — dissed the Fed’s new openness, saying, “The fact is, we don’t need to know what they’re doing as long as we think they know what they’re doing.” Could too much candor spoil the illusion?
