Fed Talks "Green Shoots" in Public

You’ve heard the old axiom “Do as I say, not as I do”? Today, the Federal Reserve’s done one better: “Do as we say, not as we forecast.”

Despite all the mentions of “green shoots” of recovery sprouting about — the “tentative signs” that the recession is easing — the fine details of Federal Open Market Committee minutes released yesterday painted a clear picture: The worst is yet to come.


Funny how that works, eh? If Mr. Bernanke were to sit before Congress and say, “I expect unemployment, inflation and our economy at large to all deteriorate for the rest of the year; it’s even worse than we predicted back in January,” that would cause quite a commotion.

But that’s the beauty of fine print. These forecasts can be found at the end of the FOMC’s 20-page release, in a hard-to-interpret table. Only someone who’s being paid to do so would have the patience (or stupidity) to sift through the 6,800-plus words preceding it.

“Fed Chairman Bernanke’s ‘green shoots’ are sprouting, but only for inflation,” writes John Williams, “not for a turnaround in collapsing economic activity.

“Thanks at least partially to the Fed’s efforts to debase the U.S. dollar, the greenback has been in gradual decline recently. Largely reflecting the dollar’s weakness, oil prices are their highest since early November, and gasoline prices appear likely to be up 12-13% in May, versus April, nearly double the rate of the monthly gain seen last year.

“Irrespective of any near-term market volatility, long-range weakness in the dollar should be reflected in long-range upside pressures on U.S. dollar-denominated commodity prices (particularly oil) and on related upside pressures on U.S. consumer inflation.”