The Most Important Ben Bernanke Speech That No One Heard

Robert Holmes:

(…) But what the Fed chairman hinted at during the conference, overshadowed by the day’s earnings releases and gloomy news from Europe, bears more attention than it received, especially from the protestors.

“With respect to monetary policy, the basic principles of flexible inflation targeting — the commitment to a medium-term inflation objective, the flexibility to address deviations from full employment, and an emphasis on communication and transparency — seem destined to survive,” Bernanke said in his speech.

Though his comments appear innocuous, some investors and economists are wondering whether he was suggesting that the Fed, which has primarily targeted inflation for monetary policy, would instead target nominal gross domestic product, or NGDP. Bill Gross, who manages the world’s biggest bond fund at Pimco, tweeted that “Bernanke’s emphasis on ‘communications’ is likely code for ‘targeting’ nominal GDP or unemployment.”

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We can only hope. Read the whole thing.