This is the Cato Daily Podcast for Wednesday, November 19th, 2008.

I'm Caleb Brown. A year ago this week at the Cato Institute's annual monetary conference,

Fed Chairman Ben Bernanke announced steps to increase

the Federal Reserve's transparency.

Why then, William Poole asks, is the Fed going about dramatic shifts in policy with no formal announcements.

William Poole is a senior fellow at the Cato Institute and is the former president and chief executive officer of the Federal Reserve Bank of St. Louis.

Very little of the data that's coming out recently indicates inflationary pressure, right?

Correct.

If that's the case, is there a risk that the Fed will in some way try to

inflate away some of the problems that we're having right now?

I believe that's a longer run risk. I don't think it's a risk in the near term. I think the problem in the near term the Fed faces is how to prevent the economy from spiraling downward into a very deep recession with the risk,

I say risk not probability, but the risk of ongoing deflation that would be

extremely damaging to the economy.

That's the problem the Fed is dealing with right now.

And I believe the Fed's going to be successful.

I think deflation is unlikely, but there are a lot of downward forces on the economy that could end up if not offset by the Federal Reserve in a deflationary environment.

You have suggested that the Federal Reserve has essentially an unannounced policy change.

Describe what you mean.

Well, when we look at the data, it's now been going on for long enough weeks, that it seems to be pretty

unmistakable, two things we could focus on.

First, the FOMC routinely announces a target for the federal funds rate, sometimes called the intended federal funds rate.

And the job of the Federal Reserve Bank of New York is to keep the actual rate close to the target.

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