Translating Bernanke

In an interesting article in the Wall Street Journal, Jon Hilsenrath translates Ben Bernanke's congressional testimony. The article states that monetary policy will most likely not be tightened any time in the near future because "there is no reason".

The article also points out that the Federal Reserve thinks the recovery is real, but there will be some problems down the road given the condition of many state and local governments.

I can only hope that the Fed leaving interest rates and monetary policy alone in the coming months will help improve the economy further and we won't go back into a recession.


luke said...

I dont see why there would be a lot of speculation about the fed raising interest rates. If they cant even officially say that the recession has ended, it would seem a little premature to raise interest rates and stunt the comeback.

Patrick said...

Maybe the Chinese could benefit from having someone like Bernanke working on their monetary or fiscal policy. China's enjoyed strong growth over last few years, especially during the recession that hit most other developed countries, only to throw on the brakes a few months ago by raising interest rates to combat inflation fears.

Dr. Tufte said...

-1 on Luke for poor punctuation.

I'm not sure that "knowing" that the recession is officially over is any impediment to acting as if it is.

It really isn't any different than leaving a game early because you're pretty sure one team has locked up a win already.

DSM said...

Wouldn't it actually help the housing crisis if inflation increased? I mean if we experienced high inflation then housing prices should increase. If housing prices increased then people wouldn't be upside down in their mortgages. I wouldn't mind owning real estate during a period of high inflation. Any thoughts?

Dave said...

DSM has made a common error (that's OK outside of class, but I try to discourage here). This is to view the problem asymmetrically.

Anyone who is paying on a contract whose terms are fixed nominally will benefit from inflation. So, I'm with DSM on this.

But ... for the economy as a whole, this is a wash, because there are people on the other end of those contracts who'll be hurt.