The Administration has done little to pressure change in those policies, and by raising interest rates, the Fed would only push the dollar higher and make conditions worse.
Waiting for manufacturing to regain another 400,000 jobs before raising rates seems reasonable. And privately lobbying the Treasury to get tough on foreign exchange rate manipulation makes sense.
4. Worry less about stock prices.
Fed policies have given stock prices a lift, but those are not high by historical standards.
Tough economic conditions at home have not held down profits of corporate America. The Standard & Poor’s 500 earn much of their profits abroad. Since 2000 corporate earnings are up 440 percent, while stocks increased only 22 percent—much less than inflation at 43 percent.
Yellen should not comment about stock values, but quietly waiting for the S&P to catch up with inflation, or rise to about 2200 before fretting, makes sense.
5. Say a lot less.
Ben Bernanke made a big deal about offering guidance about future Fed policies to help businesses better plan investment, borrowing and hiring. Doing so effectively requires the Fed to predict with some precision conditions in the jobs and other key markets 6, 12 and 18 months from now.
They can’t do that any better than I can pick who will win the Super Bowl next year.
So fess up and let it go.
Peter Morici is an economist and professor at the University of Maryland Robert H. Smith School of Business and a widely published columnist. He tweets @pmorici1
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