Gregory Ip is a senior special writer for
The Wall Street Journal, based in Washington, D. C. He covers the Federal Reserve, the economy, financial markets and economic policy. He responded by e-mail to questions from Poynter Online about coverage of this week's Fed meeting:
What are two or three important factors that journalists should keep in mind when covering this event?
First, remember that the Fed is doing its best in an uncertain environment to maximize growth without giving ground on inflation. It may be right; it may be wrong -- it may have done too much, or too little. However well meaning, the Fed is a fallible group of policy makers who must be treated with the same journalistic skepticism we bring to our coverage of all public policy.
Second, remember Fed actions affect the economy with lags varying from a few months to a few years. It will be a long time before we know if what it did was right. Be humble about ours, or anybody's, ability to pass judgment now.
Third, Fed actions affect the public in multiple ways. A rate cut means borrowers will pay less, although only to the extent banks and other lenders pass along lower short-term term rates from the Fed to the customer; if the Fed helps prevent a recession, fewer people willl lose their jobs and fewer companies will close their doors; but if it lets inflation get out of hand, it may hurt our purchasing power and invite a bigger rate increase later.
What are some common mistakes journalists might make when covering the results of the meeting, and how do you think can these be helped/prevented?
When analyzing the market's response, keep in mind that it is driven primarily by the difference between what the Fed did and what it was EXPECTED to do. If the Fed cuts rates and the stock market falls, it may be because it was expected to cut rates even further.
As a general rule, only consider market reaction from the time of the announcement, i.e. 2:15 p.m. If the Dow is up 100 points at 2:15 and only 75 points at 4 pm, you cannot say the Dow rose because of what the Fed did; because it actually fell 25 points in the time after the decsion became known.
Keep in mind that what the markets do is often incomprehensible and defies easy explanation even though talking heads on TV and elsewhere may seem absolutely certain of their explanation.
Finally, in the current environment, the market that matters most is not the stock market but the so-called credit market -- corporate bonds, mortgage-backed securities, commercial paper. The difficulty good borrowers have getting credit is a big negative for economic growth. It is hard to follow the credit market; that's when having experts to call is very helpful.
