It should be reasonably clear by now that the product of Ben Bernanke’s thinly veiled “signals” concerned the Fed’s focus on curtailing its stimulus efforts as soon as it possibly can isn’t just market volatility, but real-life steps towards economic retraction. As Paul Krugman notes, it’s the wrong move to make at precisely the wrong time:

The first thing you need to understand is how far we remain from full employment four years after the official end of the 2007-9 recession. It’s true that measured unemployment is down — but that mainly reflects a decline in the number of people actively seeking jobs, rather than an increase in job availability. Look, for example, at the fraction of adults in their prime working years (25 to 54) who have jobs; that ratio fell from 80 to 75 percent in the recession, and has since recovered only to 76 percent.

Given this grim reality — plus very low inflation — you have to wonder why the Fed is talking at all about reducing its efforts on the economy’s behalf.

Still, it’s just talk, right? Well, yes — but what the Fed says often matters as much as or more than what it does. This is inherent in the relationship between what the Fed more or less directly controls, namely short-term interest rates, and longer-term rates, which reflect expected as well as current short-term rates. Even if the Fed leaves short rates unchanged for now, statements that convince investors that these rates will be going up sooner rather than later will cause long rates to rise. And because long rates are what mainly matter for private spending, this will weaken growth and employment.

Sure enough, rates have shot up since the tapering talk started. Two months ago the benchmark interest rate on 10-year U.S. government bonds was only 1.7 percent, close to a historic low. Since then the rate has risen to 2.4 percent — still low by normal standards, but, as I said, this isn’t a normal economy. Maybe the economic recovery will, as the Fed predicts, continue and strengthen despite that increase in rates. But maybe not, and in any case higher rates will surely mean a slower recovery than we would have had if Fed officials had avoided all that talk of tapering.

Krugman figures Bernanke is bending to two kinds of pressure: from economists and a creditor class for whom all seven of the deadly sins are inflation, even if there is no evidence it is impending, and then also from those who for one reason or another don’t want the recovery to continue. But it’s a big deal, and also, of course, a bit of a self-fulfilling prophecy. For a variety of reasons the Fed (along with other central bankers) has been the one U.S. institution that’s been able to do anything lately to boost growth even as others (e.g., the United States Congress) have been moving in the opposite direction. If this effort “tapers” prematurely, so too may hopes for anything approaching a normal economy, for years to come.

Ed Kilgore

Ed Kilgore is a political columnist for New York and managing editor at the Democratic Strategist website. He was a contributing writer at the Washington Monthly from January 2012 until November 2015, and was the principal contributor to the Political Animal blog.