WASHINGTON (Thomson Financial) - Financial markets are showing 'tentative signs' of recovery from their upset, St. Louis Federal Reserve Bank President William Poole said today, but 'financial fragility is obviously still an issue.'
He warned that 'if the upset were to deepen in a sustained way, it might have serious consequences for employment stability.'
And further Federal Reserve action might be needed, Poole told a New York City audience, because as of now, 'we just do not know what the consequences may be.' His text was released to reporters.
'My best guess,' the St. Louis Fed president said, 'is that the inherent resilience of the US economy along with future policy actions, should they be desirable, will keep the economy on a track of moderate average growth and gradually declining inflation over the next few years.'
Most of Poole's talk was devoted to explaining how central bankers think differently from people in the financial markets. The goal is a kind of equilibrium in which 'the market behaves as policymakers expect and the central bank behaves as the market expects.'
But, since it began publicly explaining its decisions in 1994, the Fed has 'almost constantly grappled' with disclosure.
In part, Poole believes, that's because people in the press and the financial markets are usually asking the wrong question. 'What is important is not the policy action at the next FOMC meeting,' he said, 'which is typically what people want to know, but the policy regularity that will extend across many FOMC meetings, which is what people should want to know.'
And as he said is his policy, Poole refrained from 'being committal' about what the Fed might do at the next FOMC meeting.
Source: http://www.forexfactory.com
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