So Ben Bernanke finally spoke today. And as I predicted yesterday, all the early headlines are expressing disappointment that Ben didn’t announce QE3. But this disappointment is misplaced. New policy announcements are for the Federal Open Market Committee, not the Chairman. The most he could do is give an indication of where he thinks things will go.
And he thinks they should ease policy. Soon.
Here’s the case he made:
1. Unemployment is too high. This is the usual argument for easing monetary policy.
2. Inflation is below target. The usual constraint preventing this doesn’t bind.
3. The possibility that high long-term unemployment may persist “adds urgency to the need to achieve a cyclical recovery in employment.” There’s a special reason to be more aggressive.