Bernanke Rules out NGDP or Does He?

   Rather he is preoccupied with "weaning markets" off of drastic measures by the Fed.

   http://www.cnbc.com/id/45111348

    Still I wrote this before his comments today. What he said today-and didn't say-was interesting. Overall what he said was enough to move the markets up at least for today.

    "The Fed left interest rates unchanged and announced that they are holding off on any new actions to aid the economy, but left open the possibility of taking further steps in the near future."

     http://www.cnbc.com/id/45132258

     Not doing anything now is in line with the recent talk of  "weaning the market off" too much Fed action. However, he has left the door open for-for at least something more in the way of Fed action. This was enough to reassure the market for now.

     I will give him it at least for pushing back on this talk about Fed stimulus as leading to a threat of hyper inflation in the near future.

    "Federal Reserve Chairman Ben Bernanke defended the central bank's record on keeping inflation low, in the face of criticism that the central bank's weak-dollar policies have driven up consumer prices."

     http://www.cnbc.com/id/45136495

     In particular I like his answer here: "I would simply point to the record. For the last five years inflation, although it's been volatile because of commodity price fluctuations, has averaged about 2 percent, which is close to a reasonable definition of price stability, whereas the area that we have fallen short obviously is on the unemployment side."

     "So I think criticisms based on the concern about inflation have so far at least not proved to be very valid," he added.

     He, again as he has in the past, been sympathetic towards the Occupy Wall Street protests-many Republicans haven't been, like Herman Cain, Rush Limbaugh, Eric Cantor, really I said "many" but I guess what I really mean is "most."

     "We now have a more unequal society than we've had in the past. I fully sympathize with the notion that the economy is not performing the way we would like it to be," he said. "What we were doing is trying to protect the financial system in order to prevent a serious collapse of both the financial system and the American economy. We needed to take those steps and if we hadn't taken them the consequences would have been dire. Not everybody understands that."

    The one thing he said that some will not be pleased with-Scott Sumner immediately comes to mind-is this:

    "Monetary policy may be somewhat less powerful in the current context than it has been in the past," he said.

     Sumner and the other Market Monetarists believe there is actually a lot more that he could do, that he is by no means powerless because we are approaching the "zero bound" for interest rates. The New Keynesians have been skeptical of this but are more and more coming around-as it doesn't seem like fiscal policy is going to be passed soon; at this point most Keynesians will take stimulus where they can find it.

    Then there was a piece in the Wall Street Journal that claimed that Bernanke ruled out using NGDP but Sumner decided that in fact he had been misquoted.

     http://blogs.wsj.com/economics/2011/11/02/live-blog-ben-bernankes-november-press-conference/

      For Sumner's take http://www.themoneyillusion.com/

      The one thing that was kind of cool that was reported in the WSJ column was Bernanke brushing off GOP big talk about him needing to stand down in doing any more aggressive stimulus.

      Bernanke tells them to go away. "Politics is politics," he said, but the Fed's job is to "do the best we can" and pursue its mandates. "We're going to make our decisions based on what's good for the economy. We're not going to take any politics into account."

     Even though in fact he hasn't done any aggressive stimulus yet it was still cool to hear him say that.

     Here is Sumner's gloss on Bernanke:

     "What Bernanke actually said was that the Fed already had a framework for addressing the dual mandate, and thought it relatively effective.  Therefore it didn’t see a need for another framework (by implication another framework for addressing the dual mandate.)  What else could he say at this point?  Our framework sucks, and we’re going to replace the FOMC with 12 market monetarists?"

     Of course Bernanke also said:
1.  Inflation is likely to be at or below Fed objectives.
2.  Unemployment is likely to be well above Fed objectives.
3.  Current policy is appropriate

      "Bernanke’s no idiot, I have to assume he privately favors more stimulus, and is considering options for December or January.  And I think he’s counting down the days until the new crop of regional Fed presidents comes on to the FOMC, and wondering why Obama left 2 Board seats empty"

      Let's hope Sumner's gloss is right.

      An alternative gloss making the rounds right now is that the Fed doesn't have any plan for more stimulus for December and January right now, and this is why Chicago Fed President Charles Evans dissented today-the first dovish dissent since 2007, that if there was a plan to do it in December, Evans would not have needed to dissent.