It is cute when children are surprised. Their eyes light up as they discover new information about how the world works. The same sense of surprise is less endearing when it applies to central bankers. Yet, that seems to be the fashion these days: Let's take this quote from the minutes of the May 9th meeting: "The incoming data on new home sales and inventories suggested that the ongoing adjustment in the housing market would probably persist for longer than previously anticipated." And from the from the August 8th meeting we have: "developments in mortgage markets during the intermeeting period suggested that the adjustment in the housing sector could well prove to be both deeper and more prolonged than had seemed likely earlier this year." and then on September 18th we find that: "participants noted that recent data suggested greater weakness in the housing market than had previously been expected" It is disconcerting to hear that the weakness is the housing market is greater "than had previously been expected" will be "more prolonged than had seemed likely" or would persist longer "than previously anticipated." The members of the Federal Reserve Board are supposed to be knowledgeable about the economy and therefore should not be continually surprised by events. The fact that they have been repeatedly surprised by the weakness in the housing market raises serious questions about their competence. The Fed's repeated expressions of surprise warrant attention in the media, which they have not yet received. (Thanks to Tom Schlesinger of the Financial Markets Center for this one.)
--Dean Baker
