Should the Fed keep quiet?

I encourage newsmakers to talk whenever they want to — or even when they would rather not. An informed public is a good thing, after all.

Ben Bernanke

Ben Bernanke

But Paul La Monica, assistant managing editor for CNNMoney, makes an interesting case for tell Federal Reserve Chairman Ben Bernanke to clam up.

Bernanke and the Fed deserve credit for helping “save the U.S. economy from a fate that could have been much worse in 2008.”

But the markets would be better off without the Fed’s new “transparency” policy, La Monica says.

“The Fed used to be shrouded in secrecy. And while that may not have been
ideal, at least it meant that the financial markets were not obsessed
by every little utterance from Fed members.

“The market functioned normally for decades without the Fed giving
traders constant updates on the outlook for the economy as if they were
daily weather reports or box scores from baseball games,” La Monica says in a column.

“Nowadays, stocks and bonds turn on a dime any time a Fed official
says something that could be construed as a hint about the direction of
monetary policy.”

It doesn’t even matter if the comments are true, relevant or from Fed members — the markets react. La Monica says.

Traders would be better advised to ignore the constant chatter, La Monica says.

Click here for La Monica’s column.