The Fed's Aug. 9 pledge to hold its benchmark for short- term interest rates as low as zero through at least mid-2013 provoked the most opposition among voting policy makers in 18 years. Brownstein cited the split in his letter as evidence that "the Know-Somethings" including Bernanke will act even amid criticism. The Know Nothings was the name given to a 19th-century political movement opposed to immigration.
Dissenters
Charles Plosser, president of the Federal Reserve Bank of Philadelphia and one of three dissenters to the Aug. 9 rate decision, said in a Bloomberg Radio interview on Aug. 17 that the central bank should have waited to see how the economy performs and he's concerned that inflation will accelerate in 2012 and 2013.
The U.S. consumer-price index increased 0.5 percent from June, more than twice the median forecast of economists, Labor Department figures showed Aug. 18. The so-called core gauge, which excludes volatile food and fuel costs, rose 0.2 percent. The overall cost-of-living increased 3.6 percent in the 12 months ended July as the core CPI rose 1.8 percent. The Fed's informal target range for longer-term core inflation is 1.7 percent to 2 percent as measured by a Commerce Department gauge.
Inflation Expectations
A measure of traders' inflation expectations that the Fed uses to help determine monetary policy rose as high as 3.23 percent this month from 2.18 percent in August 2010. The five- year forward breakeven rate, which projects what the pace of price increases may be starting in 2016, reached the highest since December before falling to 2.76 percent Aug. 18.
Brownstein, 67, a former philosophy professor, said in the interview that measures of inflation can be misleading, saying "in World War II, there was a period where we were not quote- unquote 'printing money,' but prices went up" because of rationing.
The government's ability to borrow at some of the lowest rates on record show budget deficits aren't now a problem, Brownstein said. He said he agreed with Buffett, the billionaire chairman and chief executive officer of Berkshire Hathaway Inc., who urged Congress in a New York Times opinion article this month to raise taxes on the wealthiest individuals to help tackle the shortfalls.
"I know we're talking on the telephone so you can't see this but, 'Read my lips, raise my taxes,'" Brownstein said.