Thursday, October 29, 2015
When an organization doesn't know what to do, transparency in its actions can harm rather than help. It becomes clear to observers that the entity is drifting on strange seas. Such may be the case for the Federal Reserve. There are claims that it doesn't know how to handle inflation and is clueless on the progress of the economy. This is the reason why month after month, the Fed keeps interest rates near zero. The US economy isn't reacting to low interest rates as one thinks it should. More money hasn't resulted in faster growth, yet unemployment is down to acceptable levels. The Fed has worked hard to be more transparent in its decisions unlike its mysterious and gnomic declarations in the past, but greater disclosure hasn't resulted in more light and credibility. Rather, it is showing the limits to what the Fed can do to spur the economy.