Chairman Ben Bernanke gave a speech this morning to the Cato Institute on Federal Open Market Committee (FOMC) communications. The key points were increasing the number of Fed economic forecast reports from twice a year to quarterly and extending the horizon for projections from two to three years. This is in line with the current Fed's desire to increase transparency.

However, the real message behind the speech was Chairman Bernanke's discussion of the Fed's dual mandate of price stability and maximum employment.

For those inflation hawks who believe that the Fed should strive for zero inflation, the Fed Chairman acknowledged reality by saying that this was inconsistent with the other part of the dual mandate. Although zero inflation is possible, the cost would be too high. Dr. Bernanke is merely stating what most people implicitly understand. He also rejected the claim that this Fed is soft on inflation by indicating that the Fed aims for a very low level.

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The real message behind Bernanke's speech originally appeared on BloggingStocks on Wed, 14 Nov 2007 12:54:00 EST. Please see our terms for use of feeds.