Some have suggested the Fed should be more aggressive, even if it leads to higher inflation. Bernanke has said in the past that Japan made this mistake, failing to respond forcefully to slow growth and deflation in the 1990s. Our own Kim Schoenholtz addressed the issue today in an interview on CNBC following Bernanke’s press conference following the latest FOMC meeting. A brief summary (lightly edited):
Maria Bartiromo: Is the Fed out of bullets?
Kim Schoenholtz: They’re not out, but they’re cautious about using their most powerful tools — and they should be. This is not Japan. There’s still a good chance they will respond aggressively in the coming months.
For the complete interview, see today’s Closing Bell (short video).