Bernanke's Recession Gamble

Startling as it might seen, some news happened outside of Connecticut in America yesterday. Fed Chair Beranke's will-he won't-he dance came down on the side of won't, as rates were left unchanged. Good news for the mortgage, bad news for the economy? Seems like it. What last week looked like recession predictions from baby Bear have been joined this week by the Mama and Pappa Bear's of the economic firmament: Krugman, De Long , Feldstein to name but three. The balancing act is well put in a piece in the Times this morning:

The dilemma for policy makers is that if the Fed is forced into a serious crackdown on inflation, it risks throwing the economy into a recession. That would leave workers whose wages in recent years have barely kept up with price increases in worse shape, just as many are beginning to reap some modest gains from economic growth. And with energy prices up sharply, many workers, whose pay increases have also lagged far behind productivity gains, have less disposable income for other purposes.

There was further evidence that the White House is paying more attention to pocket book issues yesterday, when Press Sec Tony Snow led off his noon "gaggle" by pushing hopeful looking hourly compensation figures from the commerce department. Bill Emmott, former editor of the Economist, writes this morning that a slowdown in the US economy would be no bad thing, just as his ex-magazine wrote last week that slower american growth was exactly what the Fed should be in the business of promoting to combat inflation. And so they might. But a recession, following growth which failed to benefit most American workers, is a fix even the able Mr Snow might not be able talk himself out of.