Mishkin - on inflation worries & the Fed's model being perfect

28 Mar 2011 Bloomberg
[Frederic Mishkin is an American economist and professor at the Columbia Business School. He was a member of the Board of Governors of the Federal Reserve System from 2006 to 2008.]

Presenter -- people haven't felt much joy have they?
Mishkin --
"I actually think that people focus too much on the stock market. The issue was not getting the stock market up it was preventing the financial system from imploding. It's really the bond markets that are much more important. Paul Samuelson said the stock market has predicted 9 of the last 5 recessions. The health of the financial system is key to getting the whole system working again. We still have problems not just with corporates but with small businesses getting credit. And the consumer still has issues they have to deal with."

Presenter -- headline inflation oscillates around the core trend. Do you follow headline or core?
Mishkin --
"In terms of what you should care about it should be headline. Because a big component of what we spend on every day tends to be food and energy. The core is basically headline excluding those two items
[The separation between headline and core inflation and the way central bank policy has targeted this separation has unfortunately resulted in the crisis being worse than it might have been. Perhaps central banks need to hold the mirror up to themselves rather than to market investors and consumers?]

What we really care for policy is underlying inflation, 'trend inflation'. And you don't want to react to blips in temporary factors in food and energy. You want to focus on something that is a deeper concept, of where is trend inflation. And headline inflation can frequently mislead on that."

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[WestPhillyCat]

I didn't realise he was supposed to be called Ric.

Also notice that his speech on expectations tempering monetary policy and fiscal policy (5:35) is pure David Ricardo.