The Fed’s actions last Wednesday created more outrage than usual from investors, some of whom clearly felt that they had been misled, inadvertently or not, by the FOMC’s botched attempts at forward guidance during the summer months.
Challenged at his press conference, Mr Bernanke said that he makes monetary policy for the good of the economy, not to ratify the expectations of investors. In this, he is fully justified. The fact that a minority of investors might have lost money as a result of the so-called “broken contract” should not concern the Fed one jot. Caveat emptor! Read more