Manufacturing Industry
Gentle Ben? The Fed's incoming chairman confronts a choice: suffer now or later?(ON THE ECONOMY)(management of Ben Bernanke from United States. Federal Reserve Board)
Industry Week, February, 2006 by Evans, Michael K.
AS BEN S. BERNANKE TAKES OVER AS chairman at the Federal Reserve System, the influential federal funds rate is in the middle of what most economists would consider the "neutral zone." However, as he succeeds Alan Greenspan, Bernanke confronts what in essence is a political decision: Does he want the U.S. economy to be weak now and strong in 2008 to enhance the chances of a Republican victory, or does he want it to be stronger this year and weaker in the future?
This year will be a lousy year, and if the Fed continues to tighten monetary policy anyhow, it will cause a more severe slowdown while knocking the stuffing out of inflationary expectations. Under this course of action, the Fed can ease in 2007, and the economy will come roaring back in 2008. (Keep in...
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