Kathleen Hays Commentary:
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A thank-you note for the Fed
Just a few compliments and some speculation about the new statement.

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NEW YORK (CNNMoney.com) - An open letter to my favorite central bank ...

Dear Fed: Thank you so much for dropping the M-word from your policy statement! That phrase about raising rates at a "measured pace" always drove me crazy! I mean, when has the Alan Greenspan-led Fed NOT raised rates at a measured pace? Almost never: the hallmark of Mr. G's move is maddeningly plodding quarter-point rate hikes that go on like what seems forever.

And the bond market was SO hung up on that word, lately even betting that if the word "measured" was dropped from the statement, it would mean the end of Fed rate hikes was upon us. Doesn't look like that now.

Although you Fed folk also dropped the word "accommodative" from your statement (used meeting after meeting to describe the stance of monetary policy and taken too mean "the fed funds rate is still too low").

You added a clever new turn of phraseology -- clever in the sense that a surprisingly clear sentence was added that more "policy firming," i.e. rate hikes, probably lies ahead. Wow. Is this a hint of things to come?

A simple statement saying that there are risks of inflation getting out of hand, and you think you have to hike rates more?

You don't have to answer me now, I realize you may be still figuring this out. So enjoy the rest of the year, celebrate the holidays, and we'll see what words you find next year. Here's to strong growth and low inflation in 2006!


Kathleen Hays is economics correspondent for CNN. Read more of her columns hereTop of page

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