(postings will re-begin at about 6:15pm EST Saturday 27 Feb)
Lessons from Fed’s past ... Michael Bordo & John Landon Lane have researched the history of the Fed to determine when the Fed will shift from a highly expansionary policy to a neutral one ... "Our analysis... points to a pattern where monetary policy tightens close to when unemployment peaks and after inflation troughs... if we follow the patterns of postwar business cycles, and if unemployment has peaked in the fourth quarter of 2009, we may see a tightening in the first quarter of 2010 but more likely in the second quarter. However, if unemployment falls slowly – and if the last two recessions are any guide – the Fed may delay longer. This raises concerns that prolonged maintenance of low rates will fuel future inflation. Indeed, the public’s rush into inflation-protected government bonds may be a harbinger of a future rise in inflation expectations"... http://www.ft.com/cms/s/0/41d9fba0-224a-11df-9a72-00144feab49a.html (4*) (may need to register with FT for free first)