Yes, we’ve already discussed the word “considerable” at considerable length, in relation to its use by the Federal Reserve Board in its recent policy statement.
But apparently we are on to something of a considerable size. Maybe it was a slow news day, but The New York Times devoted an article to the Fed’s use of the word, noting that “Federal Reserve officials are looking for a new way to reassure investors that they are not ready to start raising interest rates.”
Fed Chair Janet Yellen
Commenting on the “considerable time” reference in the policy statement, The New York Times article reported that an account of the meeting “suggests that officials are trying to find a new way to say the same thing.”
Think about that. Unemployment remains high, inflation goals are not being met, the Fed is holding trillions in bonds it will eventually have to sell and the stock market is acting wobbly … but the Fed is looking for a “new way” to say “considerable.”
Fed Chair Janet Yellen could just say the Fed is not ready to start raising interest rates. She could say the Fed is not planning to raise rates “for a long time,” which would be reassuring to investors. Or members of the Federal Open Market Committee could go to an online thesaurus and come up with more than a dozen synonyms in seconds.
We’ll help out by sharing a few – “sizable,” “extensive,” “appreciable,” “reasonable” or “ample” might work, but we expect the Fed would feel more comfortable with “commodius.” After all, this is the crew that gave us “quantitative easing,” “tapering” and “macroprudential supervision.”
Maybe a series of focus groups is in order, so the Fed can determine which word is least likely to panic investors. Or maybe former President Clinton could issue a public interpretation of “considerable,” given his masterful definition of “what the meaning of the word ‘is’ is.”
No Time References Wanted
The New York Times also noted that, “The Fed appears to be moving closer to dropping its ‘considerable time’ language, which is widely interpreted as meaning at least six months; most officials at the September meeting said they wanted to eliminate any reference to a timeline, and instead describe the decision as dependent on progress in increasing employment and raising the sluggish pace of inflation.”
This is an incredible statement for a couple of reasons. First, how does “considerable” become “widely interpreted” as meaning “at least six months?” Is that something that economists and analysts learn to do in their doctoral studies or does it come from experience interpreting Fed action?
Second, it’s telling that Fed members don’t object to “considerable” because it’s ambiguous – they object because it’s not ambiguous enough.
And, as The Times also notes, “Most officials want to preserve the general perception that a first increase is most likely around the middle of the year. But they also are going out of their way to emphasize that the timing could change if job growth either exceeds or disappoints their expectations.”
Well, no kidding. Economic forecasts are about as reliable as weather forecasts. Everyone knows that. The Fed’s actions will be based on economic conditions. Everyone knows that, too. So what’s the problem?
Why not just have The New York Times write up the Fed’s policy statements? Then the Fed could focus on the economy, which is supposed to be its job. As the minutes note, “The economy may be improving, but even the best case remains disappointing.”
Some action – almost any action – would at least ensure investors that the Fed is ready to think about the economy again, rather than the definition of “considerable.”