If past practice holds, Bernanke's strategy in face of a
more populist Congress will be to stress the central bank's core
mission: low inflation that sets the conditions for moderate
long-term interest rates and full employment. He's already broken
with former Chairman Alan Greenspan's practice of serving as
consultant to Congress on topics that had nothing to do with
monetary policy, such as natural gas, education and trade.
The Senate Budget Committee hearing will be Bernanke's first
before Congress since the Nov. 7 election. He told lawmakers in
April that one of the ``main drivers'' of the long-term budget
gap is spending obligations tied to the aging population. At the
same time, he stressed it's up to Congress to make the ``value
judgments'' behind tax and spending decisions.
The Fed chief also testifies each February and July before
House of Representatives and Senate panels on the economic
outlook. ...
Fed officials probably welcome the economic slowdown and
wouldn't mind a more slack labor market to help cool inflation,
said Ethan Harris, chief U.S. economist at Lehman Brothers
Holdings Inc. Bernanke will have to figure out how to explain
that to Barney Frank, the Massachusetts Democrat who chairs the
House Financial Services Committee.
Frank wants a discussion about interest rates because the
Fed's decisions are a ``matter of values.''
Frank, 66, also warned Fed officials not to interpret wage
gains as fueling inflation. ``The Fed could show a little more
social sensitivity,'' he said at the National Press Club in
Washington on Jan. 3. ``The Fed will be tempted to blame real
wage increases, which are long overdue,'' for higher inflation,
he said.
To help parry such efforts, Bernanke can cite the current
state of the economy. Employers added 167,000 jobs in December,
and the jobless rate held at 4.5 percent, close to a five-year
low. The Fed's preferred inflation measure, which removes food
and energy, is starting to ebb, which could forestall further
rate increases. Existing home sales rose in October and November,
a sign that the slump in housing is past the worst.
