Fed bias blues.

• Author: Kohn, Don
• Position: Rumours about financial market - Donald Kohn of Federal Reserve Board - Brief article

Recently Federal Reserve Vice Chairman Donald Kohn appears to have fallen victim to some serious market miscommunication. In the lead-up to the March Federal Open Market Committee meeting, financial markets were full of rumors that the highly regarded former Fed staffer, now Vice Chair, had turned ominously dovish toward the U.S. economy. Rumors maintained that the Vice Chair had informally briefed financial market participants of his deep worries about the U.S. housing market in light of ongoing sub-prime mortgage defaults, as well as the unexpectedly serious decline of capital spending.

When on March 21, the FOMC issued its official statement citing concerns for both the strength of the economy and rising inflationary pressures, the markets initially bet in favor of the Kohn rumor, believing the statement of concern for inflationary worries was mere...