Reflections of a Professional Life-Long Fed Watcher
Fed-Watching Is Unlikely To Become Obsolete
by Stuart Hoffman
Stuart G. Hoffman is senior vice president and chief economist for The PNC Financial Services Group and was NABE President for 2005-2006. Previously, he was a senior economist at the Federal Reserve Bank of Atlanta. Business Week named him the most accurate economic and interest rate forecaster for 2004, and he is frequently quoted in the business press. He also serves on the Board of Directors of the Pennsylvania Partnership for Economic Education and the Economic Club of Pittsburgh--the local chapter of NABE. He is the past chairman of the American Bankers Association Economic Advisory Committee. He received an undergraduate degree from Pennsylvania State University and a M.A. and Ph.D. degrees from the University of Cincinnati, where he was a Charles Phelps Taft Memorial Fellow. In 2004, the Univeristy of Cincinnati honored him as a Distinguished Alumnus.
Policymaking at the Fed and Fed watching by the markets have changed dramatically over the past 30 years. In the 1970s, targets and instruments shifted constantly, and the prevalent belief in the Fed was that its deliberations should be as opaque as possible. Moreover, communications technology for those who would divine the Fed’s direction was limited to snail mail, faxes, and telephones. In the early 1980s, the Fed began to focus more directly on inflation and on increasing transparency. The future is likely to reveal continued restrictive Fed policy and an inverted yield curve due to eight factors that contribute to this “conundrum.” Diversification away from the dollar by foreign central banks is likely to put continued pressure on the value of the dollar and some modest upward pressure on inflation and interest rates, but a dollar meltdown is unlikely. Despite this relatively benign outlook, however, Fed watchers will continue to be busy and valued.
NABE Presidential Address, presented at the Annual Meeting, September 11, 2006. This article was updated in early October and based upon information available at that time.
by Stuart Hoffman