The Fed and Inflation

Another unavoidable hiatus, this is getting all too frequent. Speaking of frequent, that's exactly what's happening in the blogosphere. This one taking down that, that one refuting this. Sometimes the publicity involved seems to be determining the content! Not a good thing. In the meanwhile, I realized I left open some pages from Friday so this will be stale. Relevant perhaps, but definitely stale.

Here's Bob Corker, a junior Tennessee senator  from the right trying to "grill" Bernanke at a hearing. Corker, for the background, is a successful "businessman" having started a construction company and sold it. You know, the ones the right say built America.

Sen. Corker: I don't think there's any question that you would be the biggest dove, if you will, since World War II. I think that's something you're rather proud of...Do you all ever talk about the longer term degrading effect of these policies as we try to live for today?

Chairman Bernanke: I think one concern we have is the effect of long term unemployment and the people who haven't had jobs for years. That means they're never going to acquire skills for years and be a productive part of our workforce

You called me a dove. Well maybe in some respects I am but on the other hand my inflation record is the best of any Federal Reserve chairman in the post-war period, or at least one of the best — about 2 percent average inflation... 

Well that's how you define trying to bait someone and Bernanke has a great response - I would've played School-the-senator but then that's one of the million reasons why I'll never be a Fed Chairman. Courtesy Tim Duy, Bernanke isn't entirely wrong:

Here's CPI:

and here's PCE:

Everyone knows Volcker presided over the biggest decline but Bernanke's numbers don't lie. And more importantly, the Fed has a dual mandate. Even more importantly, the goal isn't low inflation, it's stable inflation. We're not too far removed from deflationary fears in any case. Inflation's not the only thing the Fed has had to look out for

Sometimes I try and imagine an academic being grilled by a representative of "the people" - some random congressman representing a small district or state, having done his/her 2 cents of research and trying to trip up someone like Bernanke. How do they keep their exasperation under control?