The Federal Reserve exists to convince people that someone is in charge of an economy that exists because nobody is in charge of it.
The invisible hand is vastly more real than the Chair-man behind the curtain who claims to be controlling it.
Econ prediction – rates certainly won’t go up. If they do rise it means Bernanke has lost touch with reality, which is vastly more frightening than mere inflation. When Bernanke said “Subprime is contained” last year he probably knew he was wrong. In spite of the fact that he isn’t as powerful as everybody seems to think it still makes me nervous when he’s incorrect and doesn’t intend to be.
In my view, Bernanke’s job is simply to prevent deflationary spirals. A view supported by his paper
Deflation: Making Sure “It” Doesn’t Happen Here
http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021121/default.htm
Deflationary spirals appear to be somewhat inevitable after a credit bubble of this magnitude combined with global rebalancing on a scale never before seen. This reminds me of campaigning politicians who promise to fix the economy as if they have some magical lever made from repurposed silver bullets.