Ben Bernanke's Uncertainty Principle

With the clock ticking down on the next meeting of the Federal Reserve's policymaking committee and traders betting on another rate cut this month, Fed chairman Ben Bernanke gave a little talk about uncertainty today.

Speaking by video-conference hookup to a meeting at the St. Louis Federal Reserve Bank, Bernanke spoke of the difficulty central bankers face in distilling and cross-referencing economic statistics and the perception of those figures by business decisionmakers and consumers.

"Uncertainty--about the state of the economy, the economy's structure, and the inferences that the public will draw from policy actions or economic developments--is a pervasive feature of monetary policy making," he said, according to a transcript of his remarks.

"The fact that the public is uncertain about and must learn about the economy and policy provides a reason for the central bank to strive for predictability and transparency, avoid overreacting to current economic information, and recognize the challenges of making real-time assessments of the sustainable level of real economic activity and employment," he added. "Most fundamentally, our discussions of the pervasive uncertainty that we face as policymakers is a powerful reminder of the need for humility about our ability to forecast and manage the future course of the economy."

Uncertain about the implications of Bernanke's discourse on uncertainty? Follow the money.

Fed Funds futures traded on the Chicago Board of Trade suggest a 76 percent chance that the Fed will cut rates by 25 basis points at its meeting on Oct. 31. That is up from 70 percent on Thursday and 32 percent a week ago.

by Mark Stein