Bernanke's big bucks

International Economy, The, Wntr, 2007

To date (knock on wood), Federal Reserve Chairman Ben Bernanke and his associates have confounded their critics, ending the long series of hikes in U.S. short-term interest rates at precisely the right moment. Central bankers often seek a successful "soft landing," but usually fail. Bernanke may hit the bull's-eye on his first try.

Be that as it may, nothing in the near-term will be simple. Questions abound. With oil prices declining at the beginning of 2007, for example, should the Fed see this (and any further) fall in oil prices as a potential stimulant for growth acceleration and higher inflation down the road? Is it possible the United States has yet to feel the full force of the bursting of its housing bubble? Looking at the experiences of countries such as the United Kingdom, Austria, the Netherlands, and Spain, any weakness that spills over from a weakening housing sector tends to emerge roughly six to eight quarters after the top in housing. The U.S. housing market peaked in the summer of 2005. That means consumer weakness may soon accelerate.

Sound intimidatingly confusing? That's why they pay Ben Bernanke the big bucks. And so far, his instincts have been right on the money.

Federal Reserve Chair Ben Bernanke: Will he hit the bull's-eye in his first try?