Bernanke Provides Context

Speaking at Harvard University,Ben Bernanke,Chairman of the U.S. Federal Reserve,has put the current situation in historical context.So far,the U.S. economy has dealt with the oil shock pretty well,Mr.Bernanke said.The Fed has learned the lessons of the 1970s.Maintaining a commitment to price stability remains a top priority.Fixing inequality by limiting economic dynamism is a step in the wrong direction.Inflation today is significantly higher than he would like,but is lower than in the 1970s.There is little indication of the beginnings of a wage-price spiral today.Inflation is up 1% this year,compared to 6% in the 1973 oil shock,which was a result of war in the Middle East.Still,the rise of some inflation expectation indicators is of significant concern to the Federal Reserve,the central banker noted.Crude prices today are up more than four-fold,much like the 1970s,but the economic slowdown today is more due to housing and financial problems than to the price of oil,Mr.Bernanke reflected.