In his first term as Fed chairman, Ben Bernanke played the role of savior, lending hundreds of billions to banks and businesses, backing the mortgage market, and cutting interest rates. In his second, Bernanke will have to turn “strict disciplinarian,” reversing earlier moves to respond to a massive deficit, writes Edmund Andrews in the New York Times. That's going to be both difficult and unpopular and risks putting the Fed “on a collision course” with the White House.
If the Fed becomes disciplinarian “too early it could stop the recovery in its tracks,” notes Simon Nixon in the Wall Street Journal. “If the central bank moves too late, however, there is a risk that inflation expectations will get out of control.” But starting too late, economists say, is far less dangerous than starting too early. “The likelihood is that Mr. Bernanke will keep monetary policy loose for a long time.”