Does the Fed chairman plan to keep monetary policy loose?
Federal Reserve Chairman Ben Bernanke gave an important speech in Atlanta over the weekend. He defended the Greenspan Fed, saying the policy of low rates in the early 2000s did not cause a bubble in housing. Bernanke made three main arguments. First, the Fed might have been too loose as determined by actual inflation measurements, but not if measured against the Fed’s forecasts for “core” inflation. Second, even if the Fed was too loose, home prices rose more than expected given the historical link between monetary policy and home prices. And third, home prices increased in many countries around the world.
