FedWire, a news service of the Federal Reserve, recently published a bulletin reporting that "Fed Chairman Ben Bernanke has asked Philadelphia Fed President Charles Plosser and Chicago Fed President Charles Evans, two intellectual adversaries, to work with Vice Chairwoman Janet Yellen on how the Fed can better explain its economic goals to the public. One issue high on the agenda: Detail what changes in unemployment and inflation it would take to make the central bank veer from its low interest-rate policy, according to people familiar with the matter." According to the Financial Times, this amounts to a preview for Wednesday's FOMC announcement: "Specifically a commitment to keep the federal funds rate at its current level until the unemployment rate has fallen to 7 per cent - 7.5 per cent, provided core inflation does not exceed 3 per cent." Rather than a specific timeframe of committing to zero short-term interest rates (through mid-2013), this would make monetary policy more conditional upon the labor market's health, which we would view as a further easing from current circumstances (as long as core inflation remains anchored).

David Fuller's view The Fed is inevitably feeling less secure in a persistently weak economy. Consequently, it is trying to head off criticism, particularly from Republican candidates, by focussing more on the employment half of its dual mandate.

Low US interest rates for what is potentially a considerably longer period are likely to do more for the stock market, gold and other commodities than employment. Also, when China and India reverse their monetary tightening bias, commodity price inflation will almost certainly increase, pressuring the Fed's 3 percent figure mentioned above.