Soft or Headed South?

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SOFT PATCH or the beginning of a downturn–that’s the question that divides America’s economy watchers. Last week the Federal Reserve Board’s monetary policy makers enlisted in the soft-patch camp, and kept to their program of “measured,” repeated, one-quarter point increases in interest rates. This reflects three things.

First, there is an institutional bias against changing policy. Once Fed chairman Alan Greenspan has settled on a policy, the burden of proof rests on those who want to change it. And that is a tough burden to meet–even the expert members of the Fed’s monetary policy committee have difficulty matching the chairman’s skill at teasing a coherent view from often conflicting facts.

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