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Wednesday, November 16, 2005

Bernanke To Introduce Inflation Targeting

I suppose this is hardly 'beaking news', but Ben Bernanke made it abundantly clear in his appearance yesterday before the US Senate banking committee that he is an inflation targeting enthusiast. His actual words:

"Providing quantitative guidance about the meaning of ‘long-term price stability’ could have several advantages, including further reducing public uncertainty about monetary policy and anchoring long-term inflation expectations even more effectively....This step would in no way reduce the importance of maximum employment as a policy goal. Indeed, a key justification for this action is its potential to contribute to stronger and more stable employment growth by further stabilising inflation and inflation expectations".

Since he is also a realist and a pragmatist, Bernake also stressed that changes would be gradual and consensual. OK, I tend to be more with Greenspan on this, but now lets see how it works out in practice.