Bernanke has spoken about US monetary policy. Our summary of a
fascinating forensic analysis is as follows: “The odd behaviour of the yield
curve is not signalling recession to come but rather reflects growing confidence
in a strong economy with low inflation.”

The AFR editorial concludes: “The Fed
is expected to increase interest rates again next week, and another rate rise is
expected in May. Since Europe and Japan are also moving to tighten
monetary policy gradually, the process of global policy “normalisation” should
help ensure the Australian dollar does not trade at artificially high levels.
Good news for Australia all

favourite AFR writer, David
Bassanese writes of “Dr Bernanke’s upbeat views”.

cannot help but note the new Chairman’s preference for a US
version of “The Checklist”. “Ultimately, a robust approach to policymaking
requires the use of multiple sources of information and multiple methods of
analysis, combined with frequent reality checks. By not tying policy to a small
set of forecast indicators, we may sacrifice some degree of simplicity, but we
are less likely to be misled when a favoured variable behaves in an unusual

Read more at Henry Thornton here.

Peter Fray

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