The Wayback Machine

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Neil Irwin, August 26 2009:

Ultimately, the fact that Bernanke was a Bush appointee and a bit distant from the Obama White House may have worked in his favor, in that he is viewed in financial markets as independent from the administration. That helped assuage fears in financial markets that a chairman closer to Obama might boost the economy in the short-run at the expense of high inflation.

“The next big challenge will be maintaining the Fed’s independence and credibility after everything Bernanke has done to support the economy,” said Diane Swonk, chief economist at Mesirow Financial. “That credibility would be even more threatened if someone closer to the administration was put in.”

Consider an alternative scenario in which Larry Summers got the nomination instead, which led to higher inflation expectations over the past year. Today, we’d be better off!