Monetary Policy
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Inflation Remains Stubbornly High
“The neutral real interest rate is thought to be around 0.25 percent, suggesting the Fed may need to raise its nominal interest rate target another 175 to 200 basis points just to get to neutral.” ~ William J. Luther
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Economic Growth Doesn’t Cause Inflation. Here’s Why
“It’s important to get the basic economic relationships right when discussing monetary policy. Economic growth isn’t inflationary. Journalists and central bankers should stop saying otherwise.” ~ Alexander William Salter
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Rising Inflation Expectations Pose a New Threat to Fed Efforts
“Herding, of sorts, may thwart the effects of contractionary monetary policy measures to some degree. The Fed has a tough job ahead of it, one which may have just become a bit tougher.” ~ Peter C. Earle
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Inflated Hopes and Burst Bubbles
“The Fed’s chief task is to restore its lost credibility. In retrospect, the switch to average inflation targeting was a mistake. It gave the Fed plausible deniability for noisier, less predictable policy.” ~ Alexander William Salter
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King Dollar’s Uncertain Throne
“With continuing dollar appreciation the likelihood of trade tensions and protectionism increase, as do the possibilities of organized labor agitation. King Dollar is secure for now, but as in all palaces – intrigues persist.” ~ Peter C. Earle
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Against Interest Rate Reductionism
“Monetary policy is about money, not interest rates. Central bankers should stop trying to implement monetary policy by messing with relative prices. There are better measures and more effective transmission mechanisms.” ~ Alexander William Salter
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The Unquestioned Monopoly
“Despite the arguments made against monopoly and the arguments made in favor of competition, there is one monopoly that largely goes unquestioned. I’m referring, of course, to the monopoly over currency issuance.” ~ Joshua R. Hendrickson
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Is The Fed Trying To Inflate Away US Debt?
“The ease with which the concept is expressed, as if debt were an ice cube left on a driveway on a summer day, betrays the numerous costs associated with such a scheme. And that holds whether the undertaking is intentional or not.” ~ Peter C. Earle
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Interest Rates and Fed Tightening
“While interest rates can sometimes be useful as a policy barometer, the various monetary measures (from the monetary base at narrowest to total nominal expenditures at broadest) matter far more.” ~ Alexander William Salter
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Revisiting the Pokéflation
“During the massively expansionary monetary response to the Covid outbreak, the price of Pokemon cards and other assets shot to unprecedented levels. Contractionary monetary policy now has the opposite effect.” ~ Peter C. Earle & April Liu
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Volcker and the Great Inflation: Reflections for 2022
“Volcker’s victory over runaway inflation was not permanent, because the temptation to governments and their central banks of excessive printing, monetization of government deficits, and levying inflation taxes is permanent.” ~ Alex J. Pollock
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Financial Stability and the Fed
“The Fed failed at its initial task of promoting financial stability. It has failed at conducting monetary policy as well. Given the Fed’s major financial-policy and monetary-policy errors since 2008, we should explore major structural changes.” ~ Alexander William Salter
