FED WATCH: Keating Comments on Latest FOMC Statement

Raymond J. Keating, chief economist for the Small Business & Entrepreneurship Council (SBE Council), issued the following response to the Federal Open Market Committee’s statement on August 1:

“The FOMC’s statement today was more of the same. The Fed effectively warned that economic and employment growth would continue to under-perform for the foreseeable future, and Bernanke & Company would continue running loose money.

“So, the message is that the economic fiction the Fed has been operating under for four years now will persist. It’s the Bernanke Fed’s misguided policies, and they’re sticking to them.

“The reality, of course, is that the Fed’s previously unimaginable expansiveness on monetary policy has done nothing to strengthen this anemic recovery. And no reasons exist to think that even more easing by the Fed will help growth.

“Instead, loose monetary policy has only created negatives and uncertainties regarding the dollar and inflation. Entrepreneurs and investors continue to face nothing but negatives and uncertainties on the policy front – from worries over taxes, regulations and government spending on the fiscal side to the actual and potential grim consequences of loose money.

“Among those consequences of such expansive monetary policy, by the way, are higher energy costs given that oil is priced in dollars. When the value of the dollar and inflation are concerns, that serves to push oil prices higher than they otherwise would be.

“A shift to sound monetary policy focused on price stability would be a welcome change for small businesses and the economy, but the Bernanke Fed is uninterested in shifting policy in such a direction.”