Shortly after lunch today, the Federal Reserve will disclose the fate of the centerpiece U.S. interest rate. On form, what is this morning a 5% rate will, by the close of business, become a 5.25%, or a 5.5% rate. In response to this momentous announcement, markets will tremble and economists will second-guess. Let us now, instead, first-guess. The Fed ought not to be doing what it does.

What does it do? A good deal of mystery shrouds a very simple job description. The Fed fixes a price, specifically, the price of a loan. Every New Yorker knows a little something about price-fixing. The city, to this day, fixes a certain number of rents. It used to fix them all. Rent control was the name of this enterprise, and only a city as great as ours could have survived it.

Few prices are so important to an apartment-dweller as rent. No price is more important to a market economy than interest rates. In a well-tempered economy, they are not fixed but discovered in the open market. When fixed, there’s usually trouble. Fix them too high, and business activity stops cold; too low, and inflation bubbles up. We mean inflation in the broadest sense, prices for stocks and bonds and houses as well as for cars and toothpaste.

Not until after the fact is it given to most mortal human beings to know what the rate – the so-called Federal funds rate – should be. The Fed’s rate-fixing oracles are as much in the dark as the average investor. Alan Greenspan swung and missed more than once during his long time at bat at the Federal Open Market Committee. His successor, Ben S. Bernanke, isn’t hitting 1.000, either.

Central banking is the profession to which these worthies belong, and a dignified guild it is. But central bankers have insidiously acquired the pretensions of central economic planners. The Greenspans and Bernankes of the world presume to manage economies by manipulating an interest rate. The Fed is in the forefront of this transformation. Under Mr. Greenspan, the nation’s central bank repeatedly intervened to stabilize markets and to mitigate the damage of those crises and crackups it was unable to forestall. And, for the most part, the world cheered.

Now the world is reconsidering. Between 2002 and 2003, the Fed climbed up on its soapbox to warn against the perils of “deflation.” By deflation, it meant everyday low – and lower – prices. For reasons never made entirely clear, the Fed set its face against this state of consumer bliss. Here was the ripening fruit of globalization. The prices of internationally traded goods and services were actually falling, and the Fed protested against it. More than protest, it slashed its interest rate to try to instigate an upturn in inflation. In the 12 months ended June 2004, the funds rate was a barely visible 1%. Homeowners borrowed and refinanced, and borrowed some more. House prices soared. Once more, the world cheered.

Now the Fed is trying to quash the inflation it has all too successfully conjured. To do so, it is driving up the funds rate – even as house prices soften, stock markets wobble and the pace of growth in the money supply slackens. Arguably, the Fed fixed the rate too low in 2003. In symmetrical fashion, it may very well be about to push it too high in 2006.

It does no credit to Mr. Bernanke that he accepted the impossible job of fixing an interest rate. But he can make the best of his career move by renouncing the black art of price control and pledging to print dollars at a low and steady rate, come what may. Or he could pledge to set the rate that the market discovers, not the one that he and his colleagues dream up.

He could, at the same time, invite a worldwide discussion on reforming the monetary system. This system has been in need of attention since the collapse of Bretton Woods in the 1970s. One needn’t argue for a return to Bretton Woods per se, but it had the virtue of being grounded, even indirectly, in gold – not in the supposed perspicacity of government employees.