Last week, I wrote a note that was part forecast, part observation. The forecast was that the Federal Reserve would raise its policy rate at its upcoming meeting. The observation was that the prime mover of the tightening is one of the policy makers who has been among the most emblematic of accommodation over the past quarter century, Janet Yellen. That did not make the action wrong — only ironic.
U.S. Federal Reserve Chairman Janet Yellen holds a news conference in Washington December 16, 2015. REUTERS/Jonathan Ernst.
After publication, I got considerable reaction from observers espousing different policy views. The biggest surprise came after a busy afternoon of “Fed-speak” immediately after the policy announcement.
I returned to my office to find it stripped bare, but for some bits of wire protruding from the walls where there were once light fixtures. A note was on the floor from one “Cindy Lou Who, no more than two” who expressed a sophistication belying her years. Without comment, I repeat:
You’re a mean one, Chair Yellen,
In treating us like a felon.
True, we borrowed and binged,
And, when giving a thought to tomorrow, cringed.
But you kept us afloat with rates at zero.
Why are you no longer our hero?
Looking down from Mount Krumpit’s peak,
Do you scan the inflation that you seek?
Here or there,
Or really anywhere?
From you, not a sign of monetary policy invention,
As you follow Professor Taylor’s convention.
Here is what we learned,
As our shared beliefs have been spurned:
Janet Yellen will be a conservative central banker
So that respectable investment advisers thank her.
It doesn’t matter where we are thrust,
Tightening is a must.
Whoville is downcast, truth be told,
As those junk bond funds we had been sold,
Didn’t work out according to plan.
Perhaps, those prospectuses deserved more than a scan,
But a search for yield was compelled
By the policy accommodation that you propelled.
Despite all this, we gather in the square to sing,
At the least, the effort takes out some of the sting
Of falling incomes and stagnant wages
That seem to have been our lot for ages.
On the hearing, your heart may grow three times in size,
Determining that policy need not be a compromise.
The irony is exquisite,
In that the policy restraint that is sometimes requisite
Makes foes of friends,
Who do not understand accommodation eventually ends.
Without a doubt, Chair Yellen, it is a cinch,
Who in Whoville who will be called the Grinch.
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