The Fed Announces

The Federal Open Market Committee announcement:

FOMC 20250129

Once again the Fed has surprised no one. It’s “forward guidance” obsession has left its policy announcements near obsolete; the only “news” left is what it will say about future policy, where it comically yet tragically tries to bridge the inherent contradiction between determining policy in advance and responding to the data as they develop.

Given its utter lack of any genuine economic value – the Martin and Volcker Feds more successfully ran policy without it – one could be forgiven for wondering how much of this forward guidance kick stems from a craving for constant attention and to inflate not only the currency but its own image of importance.

As usual, the meaningful action is in the bond market, which is a far more reliable indicator of policy direction than the ostensible policymakers themselves, and which while the Fed is talking about pausing rate hikes, has actually begun cutting. It remains to be seen how long that lasts, but, in contrast to Fed talk, at least it is worth seeing.

Not that any central planner has any business manipulating interest rates in the first place. The Fed’s decades of interest rate targeting have brought bubbles and busts, inflation and deflation, lured politicians into existentially dangerous debt, and driven an epic wedge between rich and poor. It should target zero inflation, not any arbitrary figure. It should be confined to adjusting the money supply via buying and selling Treasuries and gold. If it is unwilling to confine itself to these legitimate monetary activities, then it should be ended.