"Stop them before they kill [bonds] again."

That's Edward Yardeni's plea for the Federal Reserve. "Somebody please issue a gag order on the members of the Federal Open Market Committee," he suggested last week. Yardeni, chief economist at C. J. Lawrence/Deutsche Bank Securities Corp., continues to believe that disinflation will overwhelm reflation, a view quite different from the Fed's.

On Friday, Alan Greenspan told the Senate Banking Committee that bond market inflation fears are not necessarily unfounded. A "deep-seated concern" about higher inflation has raised bond yields, the Fed chairman said. The concern, he said, came not from traders but from portfolio managers with a longer-term outlook. "These are not unsophisticated people who scare easily," he told the committee, displaying his love of the double negative. By describing what these people are not, he avoids describing what they are, a common ploy among central bankers.

Democratic Senators didn't much care for this. They chimed in to say the Fed had done enough rate-raising recently. But then, that's what you might expect Democrats in the Senate to say. Their constituents presumably are unsophisticated people, not bond portfolio managers.

To get back to Yardeni. He was critical of the Fed because it raised interest rates on May 17 and issued a terse press release suggesting that no further tightening was imminent. Then, a week later on May 24, Richmond Federal Reserve Bank President Alfred Broaddus said he expects an accelerated inflation rate of 3% to 3.5% in the next year. "Certainly not a huge increase, but not insignificant. It's very troublesome," said Broaddus.

To Yardeni, it was Broaddus' statement that was troublesome. "He should keep his opinions to himself," the man from C. J. Lawrence suggested. "Why confuse the rest of us." Yardeni noted that Broaddus, speaking to a banking group in Palm Beach, Fla., had said: "We don't have the luxury of forecasting on current inflation rates. We have to look to the future inflation and projections."

The cacophony makes monetary policy difficult to predict, but we can't argue against public discussion of important matters. Still, it would be helpful to the bond market it monetary authorities made their analyses of higher future inflation rates more understandable and convincing. It comes across as a little spooky, the work of cranky economists fixating on the 1970s, and it's tough for us to decode when the current inflation numbers don't look so bad.

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