During Ben Bernanke’s Senate testimony this morning, Republicans again lambasted the Fed chairman for worrying too little about the inflationary potential of his low interest rate/quantitative easing monetary policy. From the WSJ:
A testy exchange between Sen. Bob Corker (R-Tenn) and Bernanke. Corker says Bernanke has sparked a global currency war and created “faux” wealth. Bernanke says he’s not engaged in a currency war or targeting the currency. Corker says Bernanke is the biggest monetary ‘dove’ since World War II, proud of it and degrading society. Bernanke shoots back that he’s got the best inflation track record among Fed chairman since World War II. Corker says Bernanke is punishing savers with his low interest rate policies and throwing seniors under the bus. Bernanke says he’s looking out for long-term unemployed and that the stronger recovery he seeks will help savers. Following Corker’s advice, he adds, would throw the economy back into recession.
This chart of various inflation measures sure doesn’t make Bernanke look too dovish:
Indeed, JPMorgan notes that Bernanke’s preferred PCE inflation measure has averaged 1.99% since he became chairman. Oh, and the Federal Reserve Bank of Cleveland reports that its latest estimate of 10-year expected inflation is a skimpy 1.53%. Inflation is always and everywhere a monetary phenomenon — but not everywhere and always a big problem.
What the GOP should be hammering Bernanke about is the poor growth performance of the economy as measured by nominal GDP as the next chart shows:
Slow NGDP growth contributes to higher unemployment — the jobless rate is currently close to 8% — and makes it harder for borrowers to service their debts. Yet Republicans are pushing legislation to tighten the Fed’s dual unemployment-inflation to put more emphasis on price stability. That seems completely off point and wrong-headed in the current macroeconomic environment.