Posted by William Neikirk at 5:35 p.m.
Ben Bernanke came out blazing Tuesday in his first big meeting as chairman of the Federal Reserve. The central bank
For those who thought that Bernanke was going to be a laid-back guy who thought there should be a pause in raising interest rates, he was a big disappointment. He and his central bank colleagues cited the potential for more inflationary pressure coming from higher prices for energy and other commodities. They boosted the Fed’s benchmark short-term interest rate from 4.5 to 4.75 percent.So if you have an adjustable rate loan of any kind, whether on a mortgage or a home equity loan, your rates are going to continue to go up. You can blame the Fed, as it is known, because it can directly control these rates.
Bernanke obviously thought he needed to establish his inflation-fighting credentials at the start, so part of this latest increase may be attributed to showing he is capable of stepping into Greenspan’s big shoes.
On the other hand, Bernanke, who came from academia, has signaled that he wants the central bank to be more “transparent” in his communications with the markets and with ordinary folks as to why it makes its decision.
One big difference with Greenspan’s central bank is that Bernanke’s is much wordier. For example, at Greenspan’s last meeting on Jan. 31, the Fed explained its reasons for raising interest rates in 50 words. It took Bernanke’s Fed a total of 111 words. In the future, Bernanke would like for the central bank’s moves to be so routine and so transparent that its actions will never be front-page stuff. Maybe so, but when there is a risk that its actions will lead the country into a recession. Already, many economists are saying he’s raising interest rates too much and no one is calling him Gentle Ben any more.
