A little over a week ago, Ben Bernanke gave his first press conference and stuck to his guns over inflation fears, saying he believed high prices for oil and food were “transitory.”
Inflation hawks howled that Bernanke was ignoring the pressures from the commodity markets, where prices have soared. Bernanke should raise interest rates to slow inflation despite the effect that would have on the still-sluggish economy, they said. Rutgers University professor Michael Bardo argued, for example, that, “The Fed should pay more attention to what is going on in the global commodity markets and in the emerging countries as indications of the consequences of its and other central banks’ expansionary policies in the last two years.”
This week has seen a steady sell-off in commodities turn into a rush for the exits today. Silver is down nearly 30% this week, crude oil dropped 10% today, and the European Central Bank signaled less concern over inflation after previous hints it might raise rates. The dollar, as a result, surged.
Bernanke’s hardly out of the woods–prices are still high. But futures for gasoline are down, suggesting prices at the pump will follow. And given how high the commodities markets have spiked, there’s plenty of downside left.
All of that marks the first good news Obama has had on the economy in some time. Tomorrow’s jobs number, which the Labor department releases at 8:30 a.m., will determine if his good luck continues.