Bernanke Does His Dance Though Adds a New Twist

by Florida's #1 Mortgage Planner on February 27, 2008

Bernanke was again speaking to Congress this morning, weighing in his assessment of the economy over all.  Today, though, he added a new twist, providing a clear target range for inflation, ending speculations.

Bernanke actually came out and said the target range for inflation is 1.5% to 2.0%, which I have mentioned it to be between 1 and 2% all along.  And with their favorite gauge coming on Friday, now those numbers will really mean something when they miss (and they will be above 2.0%).

In today’s MarketWatch article, Bernanke was shown to have slipped the targeted range in his speech, leaving out the fanfare.  To me, that means he is still favoring fighting recession over inflation and trying to silence those of us that believe the Fed rate cut rage is going to fuel inflation well beyond that range.  Time will tell, but look at this comment…

“Any tendency of inflation expectations to become unmoored or for the Fed’s inflation-fighting credibility to be eroded could greatly complicate the task of sustaining price stability and could reduce the flexibility of the FOMC to counter shortfalls in growth in the future,” Bernanke said.

In other words, our concerns about inflation may be right and that could mean the rate cutting machine may be losing steam, if not coming to a complete stop.  So, Bernanke appears to want more rate cuts but realizes he and his buddies may need to take a breather and find out exactly what effect the prior rate cuts had on inflation, something he will have to convince his brethren to do.