Will The Fed lose credibility to fight inflation now that Democrats have control of Congress?
*Bloomberg, by Rich Miller, November 9, 2006
“Federal Reserve Chairman Ben S. Bernanke may find it harder to establish an inflation target now that Democrats have control of Congress.
Rhode Island Senator Jack Reed, Massachusetts Representative Barney Frank and other Democrats prefer that the Fed focus on promoting growth as well as containing inflation. Some legislators advocate that the Fed adopt a target for employment as well as prices — anathema to Bernanke and others at the central bank.
“The Democrats will give Bernanke a tougher time than the Republicans on inflation targets,” said Tom Gallagher, a senior managing director at International Strategy & Investment Group in Washington. “Support is going to be harder to come by.”
Bernanke has argued that a target would help cement the Fed’s credibility as an inflation-fighter and make it easier to manage the economy. If he’s unable to press ahead, supporters say, those aims might be damaged.”
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