Winner of the inflated head award?

Federal Reserve strategists are worried that financial markets may become confused in coming months with the arrival of the Fed's newest member of the Board of Governors, Frederic Mishkin. Mishkin coauthored a book with Chairman Bernanke on inflation targeting and, indeed, both are considered the lead global proponents for such an approach to monetary policy. As in most things in life, the issue is timing. Bernanke believes it could be many years before the intellectual groundwork is laid for a pure inflation targeting policy. Mishkin believes inflation targeting should have happened last week. "Mishkin's going to be vigorously pursuing inflation targeting so it could be confusing to the markets if they think he's doing the Chairman's bidding," one strategist said. "He views himself here in Washington for one reason and one alone--to bring about inflation targeting."

When asked for a response to Mishkin's arrival, one Bush advisor laughed, suggesting that in a group conversation the new, incoming Fed Board member referred to himself as "the world's preeminent monetary expert." Said the Bush advisor: "I think he forgot that Milton Friedman is still alive and ticking and apparently doing quite well."