Federal Reserve Chairman Ben Bernanke has confused investors with a spate of contradictory remarks that tarnish his record so far, the country’s powerful business federation said Wednesday.
“He says one thing one day and says something entirely different the next week,” said Martin Regalia, chief economist at the U.S. Chamber of Commerce.
“If we graded him on what he’s actually done, he’d be a B+/A-. But if you graded him on what he’d said, he would be a C- to a D — that low, because it’s caused unnecessary confusion in the market,” he told reporters during a briefing on the Chamber’s economic forecast.
The Federal Open Market Committee meets on Wednesday for a two-day gathering and is expected to lift interest rates a quarter percentage point to 5.25 percent when it concludes.
Bernanke confessed to an error of judgment last month in telling a television reporter he felt markets had wrongly read him as dovish on inflation, after he’d discussed prospects that the Fed might pause its rate hike campaign at some point.
Subsequent comments by Bernanke and other Fed policymakers that inflation was running too high for their comfort has hardened views it will raise keep raising rates.
“His remarks are not enhancing the transparency of the Fed,” said Regalia, who blamed Bernanke’s remarks for the recent weakness of the stock market.
“Fed chairmen in the past have understood that the words they use make a big difference ... Greenspan understood that very well,” he said. Bernanke took the helm of the U.S. central bank from Alan Greenspan on Feb. 1.
The Chamber sees another hike in August to 5.5 percent with the Fed probably then going on hold as growth slows, braked by higher energy costs and tighter monetary policy.
This will peg growth back to just below the country’s long-term trend pace of expansion before it picks back up, the Chamber said.
Business investment would be an important contributor to the economy, thanks to strong factory demand and cash-flush companies, while earnings from trade might also pick up as the dollar weakens 10 percent more next year, the Chamber said.
But it warned that currency manipulation by countries like China and Japan could not be allowed to continue unchecked.
U.S. manufacturers are particularly angry at China for pegging its yuan currency at what they say is an artificially low level against the dollar to boosts exports to the United States.
Beijing has yielded to pressure to make the currency a bit more flexible while opening up its capital markets. But critics want more and some U.S. politicians, facing tough mid-term congressional elections, threatened trade sanctions.
“If the situation gets worse, not better, we’re going to need more draconian measures to address it,” said Regalia.