Federal Reserve Chairman Ben Bernanke made a serious error in June, when he said the Fed may begin to taper its quantitative easing later this year, said Joel Naroff, chief economist of Naroff Economic Advisors.

"He said that when you look at the dual landing, inflation was too low and the . . . unemployment rate was too high," Naroff said in an exclusive interview with Newsmax TV.

Consumer prices rose 1.4 percent in the year ended in May. Unemployment stood at 7.6 percent in June.

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"In other words, there's plenty of room to do more as far as stimulus is concerned because inflation's not a risk," Naroff said. "We're just not getting the traction in the economy that we should be getting. So why are they talking about ending quantitative easing now? They should be waiting until it's really clear that the economy has begun to accelerate."

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GDP expanded only 1.8 percent in the first quarter, and many economists expect even slower growth in the second quarter.

"It was a policy mistake" to announce the potential tapering, Naroff said. "They want to have more communications, but there's so much division at the Fed that they felt they had to say something."

Editor's Note: Know the story behind the numbers: Forecaster Joel Naroff provides timely, expert analysis of key economic data for Financial Braintrust Alliance members.Visit www.fbtalliance.com for more information and to sign up.

Bernanke moved to reassure the public Wednesday that the Fed isn't abandoning its easing program, and that points out the downside of the Fed's effort at transparency, Naroff said.

"It's a clear indication of the problems that the Fed faces when it tries to communicate what they intend to do in the future," he said. "This is a situation where the Fed worked really hard out of a really difficult recession. They were making progress, but clearly not enough. They start talking about the need to end some of the stimulus, and all of a sudden interest rates back up 100 basis points."

The 10-year Treasury yield hit an almost-three-year high of 2.75 percent Monday.

"So they're really worried that being open has sent the wrong message, and what he's trying to do . . . is kind of walk it on back."

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Bernanke said Wednesday that "highly accommodative monetary policy for the foreseeable future is what’s needed in the U.S. economy."

The uncertainty about the Fed makes things difficult for investors, Naroff said. "The markets keep demanding openness from the Fed. They want to know," he said. "There's a fundamental problem with that. The problems is the Fed's got to say either we’re going to do something on this date, or we're going to do something in the future but we're not sure when."

But either way, the Fed's ultimate action depends on future economic data. "This creates a lot of uncertainty, because the reality, especially in this recovery, is sometimes the data are good, sometimes they're not good," Naroff said. Market volatility is the result, he said.

"So, for investors, what they've got to do is really focus on where the economy is, because where the economy is and where it's going is ultimately going to determine what the Fed does, rather than what they happen to say at any particular press conference or speech."

Editor's Note: Know the story behind the numbers: Forecaster Joel Naroff provides timely, expert analysis of key economic data for Financial Braintrust Alliance members.Visit www.fbtalliance.com for more information and to sign up.