Louis Uchitelle on the Fed's Current Posture

He writes:

Fed Holds Rate Steady at 5.25% - New York Times: The Federal Reserve's policy makers voted Wednesday to keep interest rates unchanged, committing themselves for the second time in six weeks to the proposition that the slowing economy will eventually damp a still troublesome inflation rate.... [T]he tone of the statement... suggested that the policy makers were clearly satisfied with the decision they made at their last meeting, on Aug. 8, to halt a series of 17 consecutive rate increases stretching back two years....

"The consensus among the policy makers that the pause was justified is perhaps stronger now than it was in August," said Robert V. DiClemente, chief United States economist for Citigroup. "What has happened to the economy since then has in some small measure enhanced the Fed's credibility."... The Fed's statement Wednesday spotlighted the housing slowdown and also suggested that the risk of a rising inflation rate, while still present, had diminished....

"There is greater recognition at the Fed that the economy has slowed to below trend growth and this is precisely the time to sit on the sidelines and watch," said Laurence H. Meyer, vice chairman of Macroeconomic Advisers and a former Fed governor. "The policy makers do not see much risk in waiting." Ben S. Bernanke, who succeeded Alan Greenspan this year as Fed chairman, is betting that the slowing economy will moderate the annual inflation rate, which now exceeds the Fed's upper-end target of 2 percent. In taking this stance, Mr. Bernanke runs up against the view of some economists, particularly on Wall Street, that consumer demand is still strong enough to give business the power to raise prices...

Ben Bernanke appears to be doing well.