"New Federal Reserve News Agency": Behncke's policy reaction function turns less dovish.

Nick Timiraos from the "New Federal Reserve News Agency" believes that U.S. Treasury Secretary Basant's policy response function has shifted to be less dovish. His remarks this year suggest that the Federal Reserve should continue to keep interest rates unchanged. Earlier this year, Basant cited models indicating that the level of Federal Reserve interest rates may be higher than the neutral rate by as much as 25 to over 100 basis points. Today he presented two points. First, he defended Walsh's decision last week not to elaborate on any policy response function: I believe that every meeting should be open, and market participants should make their own judgments... I think Walsh wants to preserve flexibility to achieve the best outcomes. Secondly, he did propose a set of policy response functions that could be seen as dovish and argued that recent shocks should be ignored: What impact will the rise in short-term interest rates bring? We will wait and see. He raised this question but then responded by pointing out that underlying inflation is very mild... very stable. In core inflation, excluding the volatile components affected by energy, the rest has remained quite stable. I believe this situation will continue.