Former US Federal Reserve chairman Ben Bernanke said the central bank’s current leaders were too slow to react to surging US inflation and, as a result, faces a period of stagflation — a combination of stagnant growth and high inflation.
“The forward guidance, I think overall, on the margin, slowed the response of the Fed to the inflation problem,” Bernanke said in an interview broadcast on CNBC on Monday. “I think, in retrospect, yes, it was a mistake and I think they agree it was a mistake.”
Fed Chairman Jerome Powell and his colleagues chose to respond gradually to surging inflation because they did not want to shock the markets with a repeat of the so-called taper tantrum in 2013, when US Treasury yields surged suddenly under his leadership, Bernanke said.
Photo: Reuters
At the same time, he warned the outcome of such a slow response was going to be a poor economic performance.
“Even under the benign scenario, we should have a slowing economy,” Bernanke told the New York Times separately.
“And inflation’s still too high, but coming down. So there should be a period in the next year or two where growth is low, unemployment is at least up a little bit and inflation is still high,” he predicted. “So you could call that stagflation.”
It is highly unusual for a former Fed chair to criticize a successor; recent chairs Alan Greenspan and Janet Yellen have seemed to go out of their way to avoid criticism. Bernanke’s comments were notable as an exception, albeit carefully worded to not be especially harsh.
Bernanke made his comments as part of media appearances before the publication of a new book, 21st Century Monetary Policy.
Separately, Elon Musk said that the US economy was “probably” in a recession — a judgement at odds with economists and available data — and cautioned companies to watch costs and cash flows.
“These things pass and then there will be boom times again,” Musk told the All-In Summit in Miami Beach, according to a livestreamed video of his remarks posted by a Twitter user. “It’ll probably be some tough going for, I don’t know, a year, maybe 12 to18 months.”
Recession fears have been growing recently as the Fed tightens monetary policy to help cool down inflation that is running near its hottest pace since the early 1980s.
The Fed increased rates by a half point earlier this month, the largest single hike since 2000, and Powell said similar moves were on the table for the next two meetings.
Officials also announced they would start shrinking their US$9 trillion balance sheet from June 1 at a pace that would step up quickly to US$95 billion a month.
Still, odds of a downturn in the coming year currently stand at 30 percent, according to the latest Bloomberg monthly survey of economists.
While the US economy shrank an annualized 1.4 percent in the first quarter, the weakness was primarily due to a record trade deficit. Measures of demand — consumer spending and business investment in equipment — actually quickened at the start of this year.
The Federal Reserve Bank of Atlanta’s GDPNow estimate currently has second-quarter GDP rising at a 1.8 percent pace.
Musk, the CEO of Tesla Inc and SpaceX, made the comments on the economy and politics as part of a wide-ranging video appearance at the technology conference.
He suggested that recessions are not necessarily a bad thing, adding that he has been through a few of them in his time at public companies.
“What tends to happen is, if you have a boom that goes on for too long, you get misallocation of capital — it starts raining money on fools, basically,” he said.
With this year’s Semicon Taiwan trade show set to kick off on Wednesday, market attention has turned to the mass production of advanced packaging technologies and capacity expansion in Taiwan and the US. With traditional scaling reaching physical limits, heterogeneous integration and packaging technologies have emerged as key solutions. Surging demand for artificial intelligence (AI), high-performance computing (HPC) and high-bandwidth memory (HBM) chips has put technologies such as chip-on-wafer-on-substrate (CoWoS), integrated fan-out (InFO), system on integrated chips (SoIC), 3D IC and fan-out panel-level packaging (FOPLP) at the center of semiconductor innovation, making them a major focus at this year’s trade show, according
DEBUT: The trade show is to feature 17 national pavilions, a new high for the event, including from Canada, Costa Rica, Lithuania, Sweden and Vietnam for the first time The Semicon Taiwan trade show, which opens on Wednesday, is expected to see a new high in the number of exhibitors and visitors from around the world, said its organizer, SEMI, which has described the annual event as the “Olympics of the semiconductor industry.” SEMI, which represents companies in the electronics manufacturing and design supply chain, and touts the annual exhibition as the most influential semiconductor trade show in the world, said more than 1,200 enterprises from 56 countries are to showcase their innovations across more than 4,100 booths, and that the event could attract 100,000 visitors. This year’s event features 17
SEMICONDUCTOR SERVICES: A company executive said that Taiwanese firms must think about how to participate in global supply chains and lift their competitiveness Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday said it expects to launch its first multifunctional service center in Pingtung County in the middle of 2027, in a bid to foster a resilient high-tech facility construction ecosystem. TSMC broached the idea of creating a center two or three years ago when it started building new manufacturing capacity in the US and Japan, the company said. The center, dubbed an “ecosystem park,” would assist local manufacturing facility construction partners to upgrade their capabilities and secure more deals from other global chipmakers such as Intel Corp, Micron Technology Inc and Infineon Technologies AG, TSMC said. It
EXPORT GROWTH: The AI boom has shortened chip cycles to just one year, putting pressure on chipmakers to accelerate development and expand packaging capacity Developing a localized supply chain for advanced packaging equipment is critical for keeping pace with customers’ increasingly shrinking time-to-market cycles for new artificial intelligence (AI) chips, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) said yesterday. Spurred on by the AI revolution, customers are accelerating product upgrades to nearly every year, compared with the two to three-year development cadence in the past, TSMC vice president of advanced packaging technology and service Jun He (何軍) said at a 3D IC Global Summit organized by SEMI in Taipei. These shortened cycles put heavy pressure on chipmakers, as the entire process — from chip design to mass
RSS