Let’s not be ‘medieval scholars’ on Fed: Economist

Economist: Predicting Fed's next move a fool's errand

The market may be obsessed over when the Federal Reserve will raise its short-term rate targets from economic-crisis levels. But according OppenheimerFunds' chief economist, Jerry Webman, using the central bank's words to try to divine the timing of that event has become a fool's errand.

"The Fed has been very clear. They expect to raise rates—'expect,' and I want to emphasize that—they expect to raise rates this year," he said Tuesday on CNBC's "Futures Now."

But will they actually end up pulling the trigger? For Webman, the answer lies not in Fed decision-makers' words or thoughts, but in the coming stream of economic data.

"We should be watching the data, not poring over—like we're some medieval scholastic scholars—every word the Fed says. If inflation numbers stabilize, employment stay OK, we continue to see the employment cost index go up a little bit, then the Fed will tighten, maybe in June, maybe in September," he said.

Jerry Webman, OppenheimerFunds
Jin Lee | Bloomberg | Getty Images

Referring to comments made by Fed Vice Chairman Stanley Fischer in the prior week, Webman notes that the central bank is now emphasizing that "we are not fortunetellers more than you are. We don't know more than you do. We think that we are going to do it this year, but we're going to watch the same data that you're watching."

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Indeed, many have taken the recent congressional testimony of Fed Chair Janet Yellen as a sign that the central bank will soon look to become more data dependent. She emphasized that the presence of the word "patient" in the Federal Open Markets Committee statements is a signal that the Fed will not raise rates for the next two meetings. But once that word is removed, the decision will depend rather strictly on the data.

Of course, a key piece of data is on tap for Friday, when the February jobs number will be released.

Webman says that a weak nonfarm payrolls report will be discounted due to weather, but an especially high number of jobs created will mean that "we've got to say rates are going higher."

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