Federal Reserve Chairman Ben Bernanke gave a speech to soldiers and their families at Fort Bliss, TX, today explaining the Fed’s role and what it’s doing to stimulate the economy.
But tucked away in his speech was a little line everyone’s been talking about:
Although spikes in oil and food prices, and other transitory factors, pushed inflation up earlier this year, inflation appears to be moderating, and we expect, based on the best information that we have today, that it will remain reasonably close to our objective of 2 per cent or a bit less for the foreseeable future.
In the longer term, monetary policy is the main determinant of inflation, and so Federal Reserve policymakers have considerable latitude to choose our longer-term inflation goal.
Could he have been hinting at NGDP-targeting, which could stimulate the economy and result in a higher inflation target? Traders might think so—the release of his statement vaguely coincided with a spike in markets.
On the other hand, this speech wasn’t exactly intended for economists or financial pros, so we’re taking this statement with a grain of salt.
Read his speech here and decide for yourself.