Monetary Policy
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Price Stability and Nominal GDP Targeting
“While we should not stubbornly insist on first-best policy if the second-best is all we can get, neither should we ignore the question of which policy is first-best. As long as we are reconsidering the Fed’s mandate, nominal GDP targeting should be on the table.” ~ Alexander William Salter
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Should the Federal Reserve Set its Own Goals?
“A target that is not determined solely by the Federal Reserve is less subject to changes solely due to deliberations at the Federal Reserve. It will enhance monetary policy’s effectiveness.” ~ Gerald P. Dwyer
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Accounting for Inflation
“The great irony is that inflation would have been transitory if only the Fed had stabilized nominal spending. Prices would have risen above trend to reflect below-trend production and then returned to trend as production recovered.” ~ William J. Luther & Morgan Timmann
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Prices Rose Even Faster In June
“Inflation has been too high for too long. Bringing inflation back down should be the Federal Reserve’s top priority.” ~ William J. Luther
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Price Stability and the Fed
“Politics is compromise. Half a loaf is better than no loaf at all. Price stability is the half-loaf of monetary policy rules. It seems foolish to go hungry simply because haute cuisine is unaffordable.” ~ Alexander William Salter
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There Are Good Reasons for Monetary Rules
“A good monetary rule does not only identify an appropriate course of action in advance. It also requires monetary policymakers to take that course and, in doing so, reduces the uncertainty businesses and consumers face.” ~ Nicolás Cachanosky
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The Corrective Contraction
“This mild recession will soon pass. Lower growth due to a higher trend inflation rate can persist forever—and will if the Fed fails to do its job.” ~ William J. Luther
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Inflation and the Fed’s Failure to Act
“Fed officials must prioritize monetary stability over political objectives such as inequality and climate policy. To simplify its operations, the Fed should consider returning to the pre-2008 corridor system of monetary policy.” ~ Thomas L. Hogan
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Should the Fed Stimulate Growth?
“Rather than consider whether the Fed should stimulate growth, we should recognize that its primary task is to prevent over- and under-production.” ~ William J. Luther
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The Race to Tame Inflation Expectations
“If the FOMC thinks inflation should be higher than 2 percent on average, it should adopt a higher inflation target—say, 3 percent—and compensate for periods of excess inflation by also promoting inflation rates below the average target for extended periods.” ~ James L. Caton
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Not so Modern Monetary Theory
“If the issue of an unbacked or insufficiently-backed currency exceeds the amount needed to pay the tax, and even exceeds the amount in demand as a medium of exchange, the value of that currency will fall (or, there will be inflation).” ~ Gary M. Pecquet & Clifford F. Thies
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Is the Fed Finally Serious About Inflation?
“Chair Powell has repeatedly claimed that the Fed will use its tools to create price stability. Will he and other Fed officials finally bring inflation back toward their stated two percent target?” ~ Thomas L. Hogan
