Bernanke Warns US Could Experience 'Stagflation'

Former Federal Reserve Chair Ben Bernanke told The New York Times on Monday that the U.S. could be heading for “stagflation,” and “a slowing economy” over the next year or two.

Bernanke told the Times that he hopes the current Federal Reserve chair, Jay Powell, will find a way to limit inflation, but he noted that “even under the benign scenario, we should have a slowing economy.”

According to Bernanke, “Inflation's still too high but [it's] 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 added, “So you could call that stagflation.”

Bernanke went on to say that “the difference between inflation and unemployment is that inflation affects just everybody. Unemployment affects some people a lot, but most people don't respond too much to unemployment because they're not personally unemployed. Inflation has a social-wide kind of impact.”

When asked about whether the Federal Reserve should pick another inflation target, Bernanke said: “Inflation targets should not be used as a short-run tool, you know？ If you raise the inflation target to 3% for some short-term purpose, then why not 4%, or why not 3.5%, or why not create a band, or whatever？”

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