It’s unclear how much of the game plan he’ll reveal, if any, but the pressure promises to be high for spilling the beans, or at least throwing out a bone.
Talking in abstractions about monetary policy and inflation targets won’t satisfy politicians this time around. It never did, and isn’t about to start now. Nonetheless, that may be all they get when Ben Bernanke fields questions for his debut grilling as Fed chairman on Capitol Hill tomorrow. Among the sea of inquiries that will no doubt get tossed at him, one we’d like to see earn some lip service is exploring Bernanke’s thinking (now that he’s in the driver’s seat) on the connection, real or perceived, between inflation and wages/employment when it comes to grinding out monetary policy decisions.
It’s a topical question, considering that unemployment’s fallen to 4.7% in December, the lowest since July 2001. Meanwhile, wages are growing nearly as fast as top-line inflation, measured by average hourly earnings and consumer prices, respectively. Using core CPI, which subtracts food and energy from the mix, wages are advancing at a considerably faster rate than inflation. All of which coincides with questions over the next move in the Fed’s monetary policy, namely, will the central bank soon declare inflation sufficiently contained and thereby end the current round of interest-rate hikes?