October 08, 2014
The Wall Street Journal ran a short piece headlined, “Dudley [N.Y. Federal Reserve Bank President William Dudley] elevates the strong dollar in the Fed’s policy outlook.” The point is supposed to be that the rise of the dollar in recent weeks will both put downward pressure on inflation and increase the U.S. trade deficit, as U.S. goods become less competitive. Unfortunately, the piece couldn’t quite keep the story straight. The second paragraph told readers:
“First, Mr. Dudley has elevated the strength of the dollar and soft global growth as factors affecting the Fed’s policy thinking. He said the weak dollar puts downward pressure on U.S. inflation and dims U.S. near-term export prospects, factors that keep the Fed patient about raising rates even as the job market improves (emphasis added). It’s unusual for a senior Fed official to speak so directly about the impact of the currency on his thinking, in part because the currency is supposed to be the domain of the U.S. Treasury.”
Yes, it is unusual for a Fed official to talk so openly about the impact of the value of the dollar on the economy, which is why it is important to get the story right. Obviously this was just a typo, but it is an extremely unfortunate one.
Note: I see that the WSJ has corrected the typo.
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