Federal Reserve Chairman Ben Bernanke's press conference seemed frustrating for him and for the reporters. It was certainly frustrating for those of us following along at home (or, in my case, at the office).
The problem, at base, is that the Fed's policy line right now is very, very strange. Fed officials keep saying the economy is in bad shape, the outlook is deteriorating, and they can do more, but they keep not really doing more. Most of the questions thus fall into two categories. There's the "Why aren't you doing more?" category, and the "How much worse would things need to get for you to do more?" category.
To the first question, Bernanke responds that there are risks to doing more, that the policy tools he's using are not that well understood, and that it would be nice if he got a bit of cooperation from other parts of the government (translation: Do your job, Congress). To the second, Bernanke says that the Fed is waiting to get more information on whether the economy is really slowing, and if so, by how much. Economist Justin Wolfers, for one, is convinced that if we get even one more bad jobs report, the Fed is going to act.
The problem comes in the tension between Bernanke's answers to these two questions. If there's more Bernanke could be doing, and if what he's doing could be effective, then it seems downright cruel to be holding out on a labor market with 8.2 percent unemployment. If the policies he could pull out, however, are so risky and ineffective that even 8.2 percent isn't reason enough to use them, then is there really anything more the Fed can do?
To put it another way, a scary interpretation of Bernanke's position is that he doesn't believe the Fed could do much more to help the economy, but he doesn't want the market to know that, and so he keeps not doing more but telling the markets he could do more if he wanted to. As one wag put it on Twitter, the bazooka Bernanke says he's got in his pocket is really just his finger.
A more benign interpretation is that he doesn't have internal support for doing more, or that he's only got a few bullets left in the gun and he wants to make sure they're still there if Europe really deteriorates and he suddenly has to combat another crisis.