Fed hawks are wrong? Federal Reserve Vice Chairman Janet Yellen is set to start her Senate confirmation hearings to become the Fed chairperson on November 14. Senate Banking Committee Chairman Tim Johnson in a statement after his meeting with Yellen, pledged to move her nomination “quickly” and said he would vote for confirmation. Senator Rand Paul, a Kentucky Republican who vowed to hold up the nomination in order to get a vote on legislation that would require a public audit of the Fed.
One of the key positive qualification Yellen has, is that supposedly she can accurately predict the state of the economy. Is this true? After all the first thing one must do before you can fix anything, is to understand where you are at. From a recent article in the Wall Street Journal apparently this is true. But of course just because you are a good analyst does not necessarily mean you can make good policy.
To extend the Wall Street analysis, I thought it might be interesting to juxtapose this data against the perceived hawks and doves on the Fed. From data from Reuters (click here for a graph) we get their view on who is believed to be in which camp. So the question is who has been more accurate the hawks or the doves?
Looking at these two data points its clear that the hawks have been wrong. Most likely the Fed hawks have been the naysayers trying to predict the “doom and gloom,” if their views are not followed. It is almost as if they wish for calamity to make their views correct. This is a dangerous game even in our own trading - to put your own personal policy beliefs into your economic analysis. Food for thought when reviewing economic hawks and “doom and gloomers.” They are often wrong.