Fed’s Poole says financial markets in recovery, consequences of credit turmoil still unknown
St. Louis Fed President William Poole says financial markets appear to be recovering, however the consequences of recent credit turmoil are still unknown. He feels the U.S. economy will see moderate growth and low inflation in the near future. Poole highlights the similarities between private sector and Fed forecasters, though he concedes Fed officials sometimes have access to confidential information that private forecasters do not and private forecasters have access to data the Fed does not, including credit card activity and prospective borrowing by major clients. An important difference between the two, however, is that “Fed policymakers do not continuously adjust the stance of policy in the same way managers adjust portfolio holdings.” Private forecasters constantly change their outlook based on the most updated data. Poole sees an important aspect of his job as controlling risk from both inflation and recession, but was careful to warn against being too vigilant against one at the expense of the other. Additionally, a crucial distinction between private bankers and the Fed is that the Fed is a price maker whereas private firms are price takers, meaning the Fed must be attentive to making their policy predictable so as to facilitate efficient planning. Poole admits he is mindful of not providing misinformation and of not committing to any viewpoint before any FOMC meeting. Finally, Poole speaks to the Fed’s dual mandate of ensuring sustainable economic growth and price stability, while emphasizing that price stability is not in conflict with high employment.