Bernanke says the Fed's slow response to inflation 'was a mistake'

Former Federal Reserve Chair Ben Bernanke said the central bank erred in waiting to address an inflation problem that has turned into the worst episode in U.S. financial history since the early 1980s.

Bernanke, who guided the Fed through the financial crisis that exploded in 2008 and presided over unprecedented monetary policy expansion, told CNBC that the issue of when action should have been taken to tame inflation is "complicated."

"The question is why did they delay that. ... Why did they delay their response? I think in retrospect, yes, it was a mistake," he told CNBC's Andrew Ross Sorkin in an interview that aired during Monday's "Squawk Box" show. "And I think they agree it was a mistake."

Like the Bernanke-era Fed, the Jerome Powell-led central bank was called on to take aggressive action when the Covid pandemic hit in March 2020. Much of the response was patterned after the financial crisis moves, but to an even larger degree.

It kept that historically loose policy in place well after the economy recovered from the crisis.

Now, the Fed is tightening policy with rate hikes and a reduction of its bond holdings that will start in June. However, the Fed is facing criticism that it waited too long to pull back and now confronts inflation running at an 8.3% annual pace.

Bernanke said he understands why the Powell-led Fed waited.

"One of the reasons was that they wanted not to shock the market," he said. "Jay Powell was on my board during the Taper Tantrum in 2013, which was a very unpleasant experience. He wanted to avoid that kind of thing by giving people as much warning as possible. And so that gradualism was one of several reasons why the Fed didn't respond more quickly to the inflationary pressure in the middle of 2021."