These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:
Wednesday, Federal Reserve Chairman Ben Bernanke will discuss with reporters decisions taken by the Federal Open Market Committee. For this unprecedented press conference to be successful, Bernanke must venture where Fed chairmen are most reluctant to go–into politics.
Economists have long held that transparency about goals and means makes monetary policy more effective. However, genuine transparency requires that Bernanke acknowledge the limits imposed on the Fed policy by the actions of Congress, the administration and foreign governments.
Inflation is heating up, thanks to rising oil, food and other commodity prices. Many in Congress and financial markets blame QE2–the Fed’s policy of purchasing Treasury securities to moderate interest rates on mortgages, corporate bonds and the like–but easy money is not causing inflation.
China and several other Asian governments choose to keep their currencies substantially undervalued against the dollar and regulate domestic gasoline and other commodity prices. Those policies boost Asian exports and growth, slow U.S. and European growth, and push up global prices for oil and other commodities.