Bill here.
As the Wall Street Journal article asks, with oil prices going up, food prices going up, and interest rates staying put, could inflation be around the corner?

The Bernanke says no. Partly because…

…he sees no big rise in “inflation expectations,” the wage and price increases that business executives, consumers, workers and investors anticipate. “Inflation expectations remain well anchored,” Fed officials concluded confidently at their last meeting, minutes show, despite obvious inflationary threats abroad. Translation: Food and energy price increases won’t prompt higher wages and prices throughout the U.S., partly because people don’t think they will.

The idea is that inflation will arrive only when we expect inflation to arrive. If we all believe in the FED’s ability to keep it at bay, then they will keep it at bay. It’s a wish fulfillment idea that WSJ writer David Wessel calls the Tinker Bell school of economics.

The article goes on to talk about the tightrope the FED must walk – one side involves tightening credit prematurely (because of rising food/fuel costs) and the other side is an overreliance on measuring inflation expectations.

Is the Bernanke right? I have no idea. But I felt like I couldn’t pass up the opportunity to put Ben’s head on Tinkerbell’s. So there you are.

Not mentioned in the article is the possibility of stagflation, like in the 70s. But I believe in the magic of the FED, and the magic of Tinkerbernankenomics. I believe in QE and fairydust. If you need more explanation, ask the ICP about it.