Ben Bernanke, chairman of the Federal Reserve Board, held his first full-fledged news conference yesterday. Others are expected to follow every quarter or so.
The decision is a good one. The Fed needs demystifying. Answering questions from reporters in front of television cameras will help the public better understand how the economy works, knowledge which will allow those who pay attention to discount the ill-founded statements of demagogues and ideologues.
Bernanke was a college professor when he was appointed to the Federal Reserve. It is his habit to speak carefully and to base his opinions on facts. He is therefore loath to try to see far into the economic future.
He did make predictions yesterday, however. Oil prices peaked at $113 barrel, which means higher prices at the pump. He doubts the price will go much higher.
Still, he agrees that “higher gasoline prices are absolutely creating a great deal of financial hardship for a lot of people …. So it’s obviously a very bad development to see gas prices rise so much.”
Inflation is low and he said it will stay low because the Reserve Board will not continue to pump money into the economy. Likewise, unemployment can’t be expected to drop much below 8 percent (it is 8.8 percent now) any time soon. To stimulate the economy enough to bring unemployment down faster would create too much inflationary pressure, he said.
“The trade-offs are getting less attractive at this point. … Inflation has gotten higher. … It’s not clear that we can get substantial improvements in payrolls without some additional inflation risk.” But, he said, his anti-inflation policies will stay in place because he believes that a high rate of inflation would kill any recovery that developed.
Bernanke also confirmed that the Fed would not try to boost U.S. exports by weakening the dollar to make U.S. goods cheaper abroad.
“The Federal Reserve be-lieves that a strong and stable dollar is both in American interests and in the interests of the global economy,” he said.
The Fed chief said the economy will continue to grow and that the rate of growth will rise later in the year to produce a total increase of between 3.1 and 3.3 percent, a growth rate that will do little to boost employment. That growth, he pointed out, will come without further stimulation from his board. The recovery, he believes, is self-sustaining.
COLD COMFORT? Not really. Bernanke’s matter-of-fact explanations should give Americans assurance that a steady hand is on the wheel. While he showed strong compassion for the unemployed and understands the burden high gas prices put on millions of commuting workers, he also has his eye on the big picture and his time frame is measured in years rather than paycheck to paycheck.
My guess is that his future press conferences will become increasingly popular with those who prefer explanations over exhortations as they try to understand what’s happening in America’s economy.
— Emerson Lynn, jr.
