Commentary: Fed chairman remains unmoved by rising oil prices
By MarketWatch
WASHINGTON (MarketWatch) — Say this about Federal Reserve Chairman Ben Bernanke — in a town of wobblers, he’s not one of them.
Surging commodity prices? No problem (”at most, a temporary and relatively modest” inflation rise) , and by the way, not my fault (emerging market demand and supply issues). See story on Bernanke testimony.
Oh, and commodity prices have climbed in all major currencies, therefore the rise isn’t because of a weaker dollar.
Bernanke’s opposition to the weak-dollar-spurs-inflation argument suggests an implicit acknowledgment that the Fed’s $600 billion bond-buy program may have hit the greenback.
He does say the bond-buy program has lifted stocks, cut volatility, and initially weakened and then strengthened government bonds. (”All of these developments are what one would expect to see” he says.) How the program accomplished all this without affecting commodity prices remained unexplained.
The more pertinent question of course is what the Fed will do once the bond-purchase plan expires. Bernanke certainly didn’t indicate that a new one would start, but seemed to suggest it could be available in, say, 2012 if the economy stalls again, given his glowing review of quantitative easing programs one and two.
Either way, Bernanke’s not a man easily moved. Commodity prices won’t do it. Only the markets for inflation-protected bonds seem to have the power to alter the course of U.S. monetary policy.
