With Friday’s strong employment and manufacturing numbers, the most obvious question (to me, at least!): How did the Fed get it so wrong?
Here we are, barely two weeks since the newly transparent Fed said it intends to keep rates low until at least 2014 — up from 2013 — yet the word out of the real world: Things aren’t necessarily so bad and, in fact, are getting better.
The disconnect is beyond obvious.
So — how can the Fed say one thing and the economy say another?
Fed Chief Ben Bernanke is fond of reminding people that monetary policyworks with a lag.
Indeed it does: Back in the late 1980s I was meeting with the then-President of the San Francisco Fed.
I was telling him how people were having trouble relocating to San Francisco because of the then skyrocketing housing prices (which, ironically, today seems like a bargain.) He looked at me quizzically and said, “Really?” Then he said, “Yes, as a matter of fact, I’ve been hearing that from some of our own people.”
Key point: It wasn’t in the numbers until it was — and a housing bust in Northern California caught the Fedby surprise.
Same case here — only in reverse?
I have my doubts, but if the Fed is always looking in the rearview mirror, it’s no wonder the economy always seems to be so screwed up.
Questions? Comments? Write to HerbOnTheStreet@cnbc.com