New study says the Fed needs to talk the talk

By  Kyle Campbell

When central banks communicate with the general public, it enhances trust and anchors inflation expectations, a recent study from the National Bureau of Economic Research finds. As the Federal Reserve attempts to tamp down inflation from a 40-year-high, these findings should serve as a wake-up call, said former Fed Vice Chair Alan Blinder, one of the co-authors of the paper….Karen Petrou, co-founder and managing partner of Federal Financial Analytics, said financial markets are already so transfixed with the Fed’s actions and move in such lockstep with them that it is difficult for the Fed to get an accurate read of the economic landscape. While she is skeptical that average citizens would ever become so focused on the Fed, Petrou said she would be concerned about the central bank gaining any more influence than it already has.“Traders are now moving on just one half wink from a regional Reserve banker and real fundamentals seem to have far less to do with markets than Federal Reserve policy, and that’s not healthy,” she said. “No institution should have that much power because it’s clearly never going to be that right.”