This is a condensed version of the original article.
This article was originally presented as a speech at the Dyer County Chamber of Commerce Annual Membership Luncheon, Dyersburg, Tennessee, August 31, 2006. The Federal Reserve has the responsibility to provide leadership. The ideal situation is when the market can reasonably predict what the Fed is going to do because the Fed has provided the leadership to make clear its objectives and how it pursues those objectives. The Fed is not and ought not to be viewed as an adversary of the markets. Policy actions and statements do have market effects. Those are unavoidable, but the Fed strives to make policy as clear as it can so that what is really surprising the markets is not Fed actions but the arrival of new information that surprises the Fed and markets together.