Bernanke fires back at WSJ editorial board

Former Federal Reserve Chairman Ben Bernanke is picking a fight with The Wall Street Journal’s editorial board.

In a post on his blog, Bernanke argued it was rich for the conservative editorial page to criticize the Fed’s work, given its own efforts to predict the direction of the economy.

{mosads}“It’s generous of the WSJ writers to note, as they do, that ‘economic forecasting isn’t easy,’ ” he said. “They should know, since the Journal has been forecasting a breakout in inflation and a collapse in the dollar at least since 2006, when the FOMC [Federal Open Market Committee] decided not to raise the federal funds rate above 5-1/4 percent.”

Inflation is currently below the Fed’s target of 2 percent, and the dollar has strengthened in recent months to the point that it is actually hindering U.S. exporters.

The newspaper argued in a piece Thursday that the Fed under Bernanke should be blamed for slow economic growth. On Wednesday, the government reported the economy grew just 0.2 percent in the first quarter of the year, well below economist expectations.

The editorial noted that the Fed has consistently predicted faster rates of growth than have actually occurred, and argued its easy money monetary policy has failed to boost the economy.

But Bernanke, now a distinguished fellow at the Brookings Institution, argued that economists in and outside of the Fed have overestimated future economic growth, and that just because the economy hasn’t done as well as predicted doesn’t mean the Fed failed. Rather, he said that the Fed did all it could to support the economy and job market, while other policymakers failed to take steps to help out.

If the editorial board is really interested in boosting the economy, he argued it should focus its energy elsewhere.

“I am waiting for the WSJ to argue for a well-structured program of public infrastructure development, which would support growth in the near term by creating jobs and in the longer term by making our economy more productive,” he wrote. “We shouldn’t be giving up on monetary policy, which for the past few years has been pretty much the only game in town as far as economic policy goes.”