Ben Bernanke believes that American inflation expectations remain on target, despite huge fluctuations in actual inflation over the last few years.
Inflation followed by disinflation canceled each other out:
“Despite increases in inflation a few years ago and now declines of inflation to very low levels, inflation expectations in the United States are very stable,” he told a question-and-answer session at a seminar in Tokyo hosted by the Bank of Japan.
Bernanke said most research considered low inflation as optimal and that price growth of around 2 per cent appeared to be right.
It’s easy to see his view as ridiculous, but it should be noted that the spread between the 10-year U.S. treasury and the 10-year inflation protected treasury remains at just 1.9%, which shows bond market inflation expectations at just about the level he mentions.