Federal Reserve Chair Janet Yellen and her international counterparts are suffering from a case of what psychologists call confirmation bias: They keep insisting inflation will accelerate even as it continues to ebb.
A newly elected Democratic president pushes a controversial tax increase through Congress without a single Republican vote. A veteran Federal Reserve chairman holds short-term interest rates at record lows. And the economy struggles to recover from a financial crisis.
The Federal Reserve’s statement yesterday that inflation is below levels consistent with the central bank’s mandate for price stability means it’s time to buy gold, said Allen Sinai , chief global economist at Decision Economics Inc. in New York.
In his six years as Federal Reserve Chairman, Ben S. Bernanke has sometimes proved too sanguine about the U.S. economy, declaring the impact of bad subprime mortgages on the financial markets “contained” in 2007 and being too optimistic about growth last year. Now that employment is accelerating, economists wonder if the central bank again will prove to be mistaken, this time by being pessimistic about the outlook.