Note to Federal Reserve Chair Janet Yellen, Ben’s got your back.
Ben, as in Bernanke. Yellen’s predecessor now pens a blog that’s closely watched for signs of what might be around the corner from the Fed. On Thursday, he used his blog to defend Yellen and throw shade at the Wall Street Journal.
The former Fed chief took umbrage with a Wednesday editorial from the Journal lambasting the “slow-growth Fed.” The newspaper’s editorial board suggested that the Fed should question its monetary-policy actions given the anemic 0.2 percent annualized rate of U.S. economic growth from January through March. It also noted that while difficult to forecast the economy, the Fed has continually failed.
“It's generous of the WSJ writers to note, as they do, that ‘economic forecasting isn't easy.’ They should know, since the Journal has been forecasting a breakout in inflation and a collapse in the dollar at least since 2006,” Bernanke wrote.
Bernanke pointed to a period when the benchmark interest rate was 5.25 percent, not near zero, where it’s been since December 2008 to support the economy. Conservative critics and the newspaper’s editorial board have long warned of that low rates will spark inflation that’s never materialized.
“With short-term interest rates pinned near zero, monetary policy is not as powerful or as predictable as at other times. But the right inference is not that we should stop using monetary policy, but rather that we should bring to bear other policy tools as well,” said the former Fed chief, before taking another swipe at the venerable paper. “I am waiting for the WSJ to argue for a well-structured program of public infrastructure development, which would support growth in the near term by creating jobs and in the longer term by making our economy more productive.”
What ticked off the normally mild-mannered Bernanke? This line from the Journal’s editorial:
“It’s heresy to say so, but maybe after six years of zero-interest rates, and long after the financial crisis ended, the Fed should wonder if its policies haven’t become an impediment to faster growth. Maybe letting markets begin to set interest rates again would lead to a better allocation of capital and less economic uncertainty. At the very least the Fed should start analyzing why its forecasts have been so wrong for so long.”
The battle (of the pen) has been joined.