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The Lay of the Land under Bernanke, February 13, 2006
Summary: New Fed Chairman Ben Bernanke gives his first congressional testimony on Wednesday and must immediately walk a fine line between being open and transparent, as he intends policy to be under his leadership, versus constraining policymakers before they have future data that will determine their decisions. Benanke also doesn't want to constrain his own choices. So, openness requires him to speak about the issues at hand and where he wants policy to take the economy. Then, he can allow future data to influence market expectations, as well as monetary policy.
New Fed Chairman Ben Bernanke gives his first congressional testimony on Wednesday and must immediately walk a fine line between being open and transparent, as he intends policy to be under his leadership, versus constraining policymakers before they have future data that will determine their decisions. Benanke also doesn't want to constrain his own choices. So, openness requires him to speak about the issues at hand and where he wants policy to take the economy. Then, he can allow future data to influence market expectations, as well as monetary policy.
As Bernanke has already articulated in previous speeches, inflation should remain within a band of 1% to 2%, which already appears to be the unofficial or implicit policy objective of the Fed. But as noted by numerous Fed officials, economic slack is fast disappearing and it is this slack that keeps inflation in check. Moreover, unemployment has declined consistently faster...
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This section contains 430 words (approx. 2 pages at 300 words per page) |
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