Tim Fernholz on what to look for when Federal Reserve Chair Ben Bernanke delivers today’s semiannual report to Congress:
At the hearing, Bernanke will have to justify his middle course between the inflation hawks and Fed directors pressing for more action: keeping interest rates at zero for the foreseeable future — the limit of conventional monetary policy — and promising to carefully watch economic conditions. The indicators aren’t looking good on either side of the Fed’s dual mandate to maintain low inflation and maximum employment: Deflation worries are increasing as inflation drops to less than 1 percent, the lowest level in 44 years, while unemployment looks to hover around 10 percent for at least another year.