Tuesday, October 18, 2011

Ben Bernanke and Headlines

I am spending two days at the Boston Federal Reserve Bank for their annual conference (schedule and papers can be found here). Chairman Ben Bernanke stopped by today and gave a speech to participants about recent monetary policy issues. The press was around so his speech was scripted with very few surprises. It was a nice summary of what we have learned about monetary policy over the last decades: the importance of flexible inflation targeting, the use of balance sheet measures when interest rates are zero, etc Very pedagogical as you would expect from an academic.

At the end of the speech I wondered how the press would summarize what he said and, more importantly, how they would choose a headline for the news. He made the job of the press very difficult by giving a very clear and balanced view on monetary policy, no surprises, no shocks. But you need a headline so here is the one from CNBC: "Fed may need to halt future asset bubbles: Bernanke". I am not sure he said that. He did talk about asset bubbles and, to be honest, he did not say anything that was that different from before: monetary policy is not the right tool to deal with asset bubbles but if the other tools do not work, it might be that the central bank has a role to play. Other central bankers probably share the same views (Jean Claude Trichet made similar remarks about a year ago), although there will always be some resistance to use interest rates to stop asset price bubbles -- as a reminder here is a post I wrote about two years ago in response to a paper by Adam Posen, a member of the Monetary Policy Committee of the Bank of England.

By the way, here is the video of the speech in case you want to hear his words.

Antonio Fatás