Bernanke made fun of own forecasting

As a Federal Reserve governor in 2004, Ben Bernanke, now the U.S. central bank's chairman, showed humility and a sense of humor in acknowledging a missed call about the path of inflation, transcripts released on Friday showed, says Reuters.

Bernanke was slow to acknowledge that inflation, after a long period of calm, was beginning to heat up. He finally threw in the towel at a meeting of the Fed's policy-setting Federal Open Market Committee in June 2004, citing "rules of forecasting" borrowed from former Fed colleague Laurence Meyer.

"Rule one, stick with your forecast as long as possible," he said, to laughter. "Rule two, when your forecast becomes untenable, make a new forecast. Rule three, know when to switch from rule one to rule two." The Fed began raising rates that month, after a long period of worrying about falling prices.

The transcripts also show that Bernanke fully endorsed the gradual rate-raising pace undertaken by the Fed that many now believe allowed a dangerous house price bubble to inflate.