When you don’t know what to do, blather. According to a report in the Wall Street Journal Friday night, Federal Reserve chairman Jerome Powell is unsure whether to continue raising interest rates at the next, June 13-14 FOMC meeting. Powell is quoted telling a press conference and panel discussion at the Fed yesterday with good old Ben Bernanke (the former Fed chairman dubbed “Bubbles") that “until very recently, it has been clear that further policy firming [read: another interest rate hike] would be required. As policy has become more restrictive, the risks of doing too much versus doing too little are becoming more balanced” [read: uh oh, maybe that would bring down the U.S. banking system].
The WSJ explains that financiers and their economists have believed in a “separation principle,” whereby monetary policy (interest rates) can be separated from “financial-market stabilization efforts” (massive liquidity pumping). But Powell pondered yesterday that might not be true: “Our tools have separate objectives, but the effects are often not entirely independent. Because they’re so intertwined, to me, there is not likely to be an absolute and complete separation of the tools–nor is that possible or desirable.”
