"Constitutional Moments"
Liveblogging World War II: June 26, 1942

Ryan Avent Downgrades Ben Bernanke

Monetary policy: An accountability moment:

[T]he contradictions in the Fed's statements and the extent of its outright failure are painfully obvious. A few points:

First, the Fed is no longer content to simply aim for an inflation range that includes its 2% target as its higher limit (all while missing wildly on the employment side of the mandate). In new economic projections released with the June policy statement, the Fed projects an overall inflation rate of 1.2% to 1.7% in 2012 (with core inflation coming in between 1.7% and 2.0%). The Fed's projections, recall, are based on FOMC members' assessment of "appropriate monetary policy". The extention of Twist is not designed to push 2012 inflation back to a range that includes 2%, in other words; it's simply necessary to keep it within the 1.2% to 1.7% window…. [T]he unemployment rate has been at least 2 percentage points above the FOMC's estimated natural unemployment rate for nearly 4 straight years while inflation has scarcely wandered more than a half percentage point away from target since late 2009. Fed members claim that the 2% target is not a ceiling, but inflation has been below 2% much more often than it has been above it over the past 4 years, inflation is projected to be at most 2% in 2013 and 2014, and inflation is projected to be substantially below 2% in 2012…. [T]he Fed has gone from merely failing at its job to aggressively failing at its job.

Second, it is difficult to pin blame for this on anyone other than Chairman Ben Bernanke…. The question, of course, is why he wants it this way…. [Perhaps] Mr Bernanke has no confidence that he can do more. That would be a stunning revelation, if true. It would cut against economic theory, against his own impressive academic work, against his comments as Fed chairman, and against the FOMC's policy statement, not to mention recent experience….

None of us know precisely what is going on in Mr Bernanke's head. Maybe someday we'll all find out. But we don't actually have to know what the chairman is thinking to subject him to appropriate accountability. We have explicit policy directives set for the FOMC by the government: the dual mandate. And we have an explicit policy goal which the FOMC determined for itself to be the best way to meet those policy objectives: its 2% inflation target. Set aside for now the question of whether that determination is correct. The FOMC is persistently failing to meet its objectives, and an accountability moment is long overdue.