Forget What the Fed Does Today, Listen to What It Says

A blog about business and economics.
Dec. 18 2013 11:55 AM

The Fed's Words Will Matter More Than Its Deeds

Ben Bernanke fades into the shadows.

Photo by Brendan Smialowski/Getty Images

The Federal Reserve is meeting today and will decide on whether to begin "tapering" bond purchases this month or leave the timing up to Janet Yellen next year. Both my instincts and my jerking knee tell me to dislike tapering, but a lot of leading authorities are on the other side. So I'm ambivalent. But more than ambivalent, I don't think it really matters all that much.

This is a weird case where words will speak louder than actions.

Here's what I want the Fed to say: Sometimes there are short-term trade-offs between inflation and growth, and right now we are much more concerned about growth than inflation. Indeed, slightly higher inflation that brought us closer to our target would be welcome in its own terms. Above-target inflation is, by definition, not that great. But under the circumstances we would happily tolerate some above-target inflation for a while if that's what it takes to get firms investing, houses built, and people employed. Every month that passes in which the unemployment rate is elevated is another month not only of temporary human misery but of long-term damage to the American economy which is threatened by a shrinking, de-skilling workforce. Everything that we do in 2013 is going to be about closing that jobs gap. We don't think inflation will spike, but we can't absolutely promise you that it won't. All we can promise you is that if it does, we won't really care unless full employment's already been achieved.


Now the Fed's not going to say that. But it is going to say something. And what it says will really matter a lot. Is it signaling a redoubled focus on growth? Is it establishing 2 percent as a symmetrical target? Or is it establishing a ceiling? Is it pleading futilty?

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.


The World

How Canada’s Shooting Tragedies Have Shaped Its Gun Control Politics

Where Ebola Lives Between Outbreaks

Gunman Killed Inside Canadian Parliament; Soldier Shot at National Monument Dies

Sleater-Kinney Was Once America’s Best Rock Band

Can it be again?

Paul Farmer: Up to 90 Percent of Ebola Patients Should Survive

Is he right?


“I’m Not a Scientist” Is No Excuse

Politicians brag about their ignorance while making ignorant decisions.


Driving in Circles

The autonomous Google car may never actually happen.

In Praise of 13th Grade: Why a Fifth Year of High School Is a Great Idea 

PowerPoint Is the Worst, and Now It’s the Latest Way to Hack Into Your Computer

  News & Politics
Oct. 22 2014 9:42 PM Landslide Landrieu Can the Louisiana Democrat use the powers of incumbency to save herself one more time?
Continuously Operating
Oct. 22 2014 2:38 PM Crack Open an Old One A highly unscientific evaluation of Germany’s oldest breweries.
Gentleman Scholar
Oct. 22 2014 5:54 PM May I Offer to Sharpen My Friends’ Knives? Or would that be rude?
  Double X
The XX Factor
Oct. 22 2014 4:27 PM Three Ways Your Text Messages Change After You Get Married
  Slate Plus
Tv Club
Oct. 22 2014 5:27 PM The Slate Walking Dead Podcast A spoiler-filled discussion of Episodes 1 and 2.
Brow Beat
Oct. 22 2014 9:19 PM The Phone Call Is Twenty Minutes of Pitch-Perfect, Wrenching Cinema
Future Tense
Oct. 22 2014 5:33 PM One More Reason Not to Use PowerPoint: It’s The Gateway for a Serious Windows Vulnerability
  Health & Science
Wild Things
Oct. 22 2014 2:42 PM Orcas, Via Drone, for the First Time Ever
Sports Nut
Oct. 20 2014 5:09 PM Keepaway, on Three. Ready—Break! On his record-breaking touchdown pass, Peyton Manning couldn’t even leave the celebration to chance.