I found this list of 10 suggested questions congress members should ask Bernanke when he testifies tomorrow that was assembled by AEI Fed watchers Steve Oliner and John Makin posted on the AEI website.
Here are some of the questions from Steve Oliner:
Mr. Chairman, what is the consensus view of the FOMC on tapering QE? The June FOMC minutes stated that about half of the committee members favored ending the QE purchases altogether before the end of this year. But in your press conference immediately after the June meeting, you said the Committee expected to end its QE asset purchases around the middle of next year, conditional on the economy evolving in line with the FOMC’s outlook. These two statements are at odds.
Is there an unemployment threshold for ending QE? In your June press conference, you said that the unemployment rate likely would be in the vicinity of 7% when the QE purchases come to an end. The minutes to the June FOMC meeting make no mention of any discussion of a threshold unemployment rate for the end of QE. Can you tell us how this threshold was selected and by whom?
What is the true unemployment threshold for increasing the federal funds rate? Your public comments since the June FOMC meeting have suggested that the federal funds rate could well remain at the zero bound until the unemployment rate is considerably below the 6-1/2% threshold that the FOMC has enunciated.
I found these questions from John Makin particularly interesting:
Mr. Chairman, should the Fed’s growth forecasts be reduced? Since your May 22 testimony that raised the issue of reducing bond purchase this year, “tapering” the US economy has slowed, inflation has fallen, and mortgage rates have risen by over a percentage point.
How, if at all, should QE be adjusted for slowed growth?
Why do you assume inflation will rise in view of a slowing global and US economy? Do you disagree with IMF warnings of a weakening global economy?
The questions from Oliner address the lack of policy coherence issue. I suppose the questions from Makin do also, but they are more pointed from the view of the current state of inflation vs. what seems like a deranged policy response – taper-talk in the face of economic slowing and cooling inflation. They do have a 2% inflation target, no?
Even though I like this set of questions much better than anything floating around lately, they still miss the staggering elephant in the room (as if policy derangement is not enough). Inflation targeting with an interest rate lever has been inoperable for nearly 5 years. Why are they just throwing different policy “tools” against the wall to see what sticks when that is obviously ineffective and leaves the impression of a clown car approach to policy. After 5 years, surely other options have been evaluated that would be easier to administer and more predicatble. What plans are there to find a replacement for this policy derangement that is understandable, predictable, and effective? Shouldn’t we have a coherent policy regime after this much time has passed or should we expect the current volatility in FOMC chatter to last forever?
In other words, Mr. Bernanke, when are you going to do your job instead of blame others for the mess?