--- title: "Meaning & Key Takeaway of: The Fed is responsible for the financial…" description: "\"“The Fed is responsible for the financial markets. Financial markets hate inflation. Particularly bond markets. If the inflation rises, the Fed has to ..." image: "https://sms4smile.com/quotes/i/de2/dean-baker-56004_bond-market_the-fed-is-responsible-for-the-financial_2762545.jpg" --- # The Fed is responsible for the financial markets… ![“The Fed is responsible for the financial markets. Financial markets hate inflation. Particularly bond markets. If the inflation rises, the Fed has to answer to them. If the unemployment rate is 6% and you could be down at 4% so that means there are 5 million people out of work unnecessarily, they…” quote by Dean Baker](https://sms4smile.com/quotes/i/de2/dean-baker-56004_bond-market_the-fed-is-responsible-for-the-financial_2762545.jpg) [Download](https://sms4smile.com/quotes/i/de2/dean-baker-56004_bond-market_the-fed-is-responsible-for-the-financial_2762545.jpg) [Open image](https://sms4smile.com/quotes/i/de2/dean-baker-56004_bond-market_the-fed-is-responsible-for-the-financial_2762545.jpg) > ““The Fed is responsible for the financial markets. Financial markets hate inflation. Particularly bond markets. If the inflation rises, the Fed has to answer to them. If the unemployment rate is 6% and you could be down at 4% so that means there are 5 million people out of work unnecessarily, they might feel bad about it but they don’t have to answer to them. Alan Greenspan will not get called on the carpet because of that but he will get called on it if inflation goes to 4%. What are you doing! How come you are not jacking up interest rates? There is a huge asymmetry. This is the politics of the Fed. The Fed is very well isolated from democratic political pressures but it is not hard for the financial markets to influence the Fed. We have this NAIRU doctrine that if we let the unemployment rate get below 6% we have inflation and therefore we are going to deliberately raise the interest rate to slow the economy to keep people from getting jobs. No one knows that.”” [Dean Baker](https://sms4smile.com/quotes/author/dean-baker/) ## About This Quote This interpretation was drafted with AI assistance. It is one reading of the quote, not the author's own explanation. The Fed balances inflation control with employment, but market pressures and political narratives create tension, leading to possibly excessive rate hikes to keep unemployment artificially high. **In simple terms:** The Fed tries to control inflation but is swayed by markets, risking high unemployment. Key Takeaway Beware of policy driven by market fear rather than economic fundamentals. Themes inflation monetary policy politics employment market influence Mood cautious critical analytical Type economic political policy When to use this quote - central bank decisions - legislative hearings - investment strategy - public communication Key Concepts NAIRU asymmetry policy bias interest rates Questions to Reflect On - How can the Fed better balance inflation control with employment goals? - What safeguards could reduce market-driven policy bias? A Different Perspective Policy may overreact to market sentiment, harming job growth. ★ ★ ★ ★ ★ No ratings yet [Bond market](https://sms4smile.com/quotes/about/bond-market/) [Customer](https://sms4smile.com/quotes/about/customer/) [Financial Market](https://sms4smile.com/quotes/about/financial-market/) [Investing](https://sms4smile.com/quotes/about/investing/) [Money](https://sms4smile.com/quotes/about/money/) ## Related quotes > [I continue to believe that the American people have a love-hate relationship with inflation. They hate inflation but love everything that causes it.](https://sms4smile.com/quotes/william-e-simon/i-continue-to-believe-that-the-american-people-have-a-love-hate/) [William E. Simon](https://sms4smile.com/quotes/author/william-e-simon/) > [“The job of the Federal Reserve is “to know when to remove the punch bowl at the party.” Under Alan Greenspan’s leadership its motto…](https://sms4smile.com/quotes/said-elias-dawlabani/the-job-of-the-federal-reserve-is-to-know-when-to-remove-the-punch/) [Said Elias Dawlabani](https://sms4smile.com/quotes/author/said-elias-dawlabani/) > [“Back in July 2003, he’d written them a long essay on the causes and consequences of what he took to be a likely housing…](https://sms4smile.com/quotes/michael-lewis/back-in-july-2003-he-d-written-them-a-long-essay-on-the-causes-and/) [Michael Lewis](https://sms4smile.com/quotes/author/michael-lewis/) > [Alan Greenspan is going to go down in history as one of the worst Federal Reserve chairmen ever.](https://sms4smile.com/quotes/bill-foster/alan-greenspan-is-going-to-go-down-in-history-as-one-of-the-worst/) [Bill Foster](https://sms4smile.com/quotes/author/bill-foster/) > [The dirty little secret is that both houses of Congress are irrelevant. ... 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I mean, Reaganomics, to put it simply, was trying to get low taxes for wealthy people.…](https://sms4smile.com/quotes/dean-baker/i-don-t-think-reganomics-will-ever-fully-end-i-mean-reaganomics-to/) [Dean Baker](https://sms4smile.com/quotes/author/dean-baker/) > [The elites hate to acknowledge it, but when large numbers of ordinary people are moved to action, it changes the narrow political world where…](https://sms4smile.com/quotes/dean-baker/the-elites-hate-to-acknowledge-it-but-when-large-numbers-of-ordinary/) [Dean Baker](https://sms4smile.com/quotes/author/dean-baker/) > [I know many Europeans and I think many of them don't even believe me when I say that people in US don't have vacations.…](https://sms4smile.com/quotes/dean-baker/i-know-many-europeans-and-i-think-many-of-them-don-t-even-believe-me/) [Dean Baker](https://sms4smile.com/quotes/author/dean-baker/) > [Economists and financial analysts are not like steelworkers or people in other occupations. 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Alan Greenspan will not get called on the carpet because of that but he will get called on it if inflation goes to 4%. What are you doing! How come you are not jacking up interest rates? There is a huge asymmetry. This is the politics of the Fed. The Fed is very well isolated from democratic political pressures but it is not hard for the financial markets to influence the Fed. We have this NAIRU doctrine that if we let the unemployment rate get below 6% we have inflation and therefore we are going to deliberately raise the interest rate to slow the economy to keep people from getting jobs. 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