Lonesome Dove: Ben Bernanke and what the Federal Reserve does next

FOR the blogosphere, the most entertaining part of the Federal Reserve's meeting today was Ben Bernanke's defence during the press conference against Paul Krugman’s charge that he has betrayed his academic past in failing to ease more aggressively and aim for higher inflation.

That is a pity because while it was great theater, it obscured a more important revelation. Not only is Mr Bernanke still a dove, he is increasingly an isolated dove, and that isolation has significant consequences for monetary policy, the economy and the markets.

The statement released by the FOMC was largely as expected and a non-event for markets: “economic growth [will] remain moderate over coming quarters and then … pick up gradually,” inflation will fall from its temporarily elevated levels to 2% or lower, and the Fed expects to keep interest rates “at exceptionally low levels … at least through late 2014.”

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