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Analysts Say Fed's Statement Altered Language, Not Policy

Thursday, 22 Mar 2007 | 4:54 PM ET

John Ryding, chief U.S. economist for Bear Stearns, told CNBC’s “Street Signs” that the Federal Reserve’s primary concern continues to be inflation.

“The Fed may have softened its bias to raise rates to be a little more balanced, but it’s far from neutral,” he said Thursday. “The risk that the Fed sees is still inflation being too high. Therefore, the policy risk is still to higher rates…The Fed has been telling us policy is data-dependent and so if inflation runs higher, the next move will be a tightening.”

Steven Wieting, director of economic and market analysis for Citigroup, said the Fed tinkered with the language of its statement, not the policy.

Translating the Fed
Trying to make sense of the Fed's comments, with Steven Wieting, Citigroup director of economic & market analysis; John Ryding, Bear Stearns chief US economist and CNBC's Erin Burnett

“After not having tightened for several meetings, it seemed that there would be a tightening in monetary policy in upcoming meetings, in the short-run at least,” he said. “So, they specifically took away the awkward language that pre-disposed that the next move would, in fact, have to be a firming.”

He said he Fed didn’t want to be in a position of setting guidelines that could be swamped by new and changing data.

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