Brad DeLong muses that Ben Bernanke has changed inflation expectations without anybody knowing it:

I see no signs anywhere in the marketplace that there is any threat of rising inflation expectations. He stated that he was unwilling to undertake more stimulative policies because “it is not clear we can get substantial improvements in payrolls without some additional inflation risks.”

But the personal consumption expenditure deflator (excluding food and energy) has not seen a 2 percent er year growth rate since late 2008: over the past four quarters it has only grown at 0.9 percent. At a 3.5 percent real G.D.P. growth rate, unemployment is still likely to be at 8.4 percent at the end of 2011 and 8.0 percent at the end of 2012 — neither of those levels of unemployment would put any upward pressure at all on wage inflation.

It thus looks like 1 percent is the new 2 percent: with current Federal Reserve policy, we are looking forward to a likely 1 percent core inflation rate for at least another year, and more likely three.

This gets confused because the Fed looks at “core” inflation, which exempts commodities like food and fuel which are more volatile. Of course, people still have to buy food and fuel, so they experience inflation. But that’s not part of the targets the Fed sets. And they’ve changed that target, magically, without telling anyone.

A higher inflation target would, according to the experts, mean more jobs and a stronger recovery. I think people would live with higher oil prices if it meant they had a job. But Bernanke won’t do that. In fact, he won’t even commit to the STATED INFLATION RATE for the country, instead playing this game where we can’t even approach that number.

And there’s a lot of blame to go around here. To quote Mike Konczal:

So the Fed is doing neither of its two jobs. Unemployment is too high, and inflation too low, so it should be doing whatever it takes to stimulate the economy. The natural question that puts pressure on Ben Bernanke is: “Are you worrying too little about unemployment? And are you worrying too much about inflation?”

But if you got all your sense of the world from the questions that were asked during the press conference, you would expect that unemployment wasn’t a major problem and crushing inflation was just around the corner [...]

Part of the problem has to be that most of the questions were asked by business journalists, who report less on the devastation that unemployment brings and more on the bond and oil markets. But part of the blame goes towards liberals, who haven’t pressured Bernanke enough on job creation. Bernanke is a Republican and ultimately he is going to be hawkish on inflation at a time when the exact opposite is needed. We need to demand clearer answers from him as to why he views protecting the financial sector as an ends instead of a means and why he’s prioritizing one part of his mandate over the other.

See also Matt Yglesias on this question. Konczal and the Roosevelt Institute put on a one-day conference yesterday called The Future of the Fed, and all of the panels are posted at the site. It’s worth watching through them – monetary policy needs to be questioned in the full light of day.