Monetary Policy
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Fed Raises Rate, But Signals Potential Pause in May
“In 2021 they were looking for help from recovering supply chains. Now, they are looking for help from tight financial markets. It’s time FOMC members help themselves — or, God help us all.” ~ William J. Luther
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Moral hazard is a fact of life. The Fed should focus on inflation.
“To the shame of two generations of economists-turned-policy-advisors, moral hazard is a fact of life. We don’t need to add permanent dollar depreciation to this mess.” ~ Alexander William Salter
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The Fed Isn’t Powerless
“Responsible students of monetary policy must vigorously resist the ‘powerless Fed’ myth. All it does is absolve central bankers of responsibility for what, on the basis of good theory and mounting evidence, is primarily their fault to begin with.” ~ Alexander William Salter
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There’s No Such Thing as a Wage-Price Spiral
“The recent uptick in inflation is worrying, and the Fed needs to get a handle on the situation before higher inflation expectations become entrenched. But the Fed doesn’t need to take a sledgehammer to labor markets to ease the economy’s pricing pressures.” ~ Alexander William Salter
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Understanding Inflationary Finance
“Providing revenue to the state is one of the reasons (and, perhaps the primary reason) governments worldwide monopolize the issuance of high-powered money.” ~ Bryan Cutsinger
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More Interest Rate Hikes Ahead
“Fed officials will likely continue tightening, and to a greater extent than previously projected. Their overreaction will not undo the damage of acting too late. It will make matters worse.” ~ Nicolás Cachanosky
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Persistently Pesky Price Pressures
“Although it may be difficult, the Fed must persevere. Elevated aggregate demand remains the best explanation for ongoing inflation. There is no reason for the Fed to ease its policy.” ~ Alexander William Salter
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Inflation Surges in January
“How high rates will ultimately go depends on how inflation evolves over the next few months — and how quickly the Fed reacts to restore confidence in its longer term-inflation projections. The January PCEPI release marked a step in the wrong direction.” ~ William J. Luther
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Joblessness and the Fed
“Without a symmetric response to deviations from the target, the Fed’s so-called average inflation target will not produce 2 percent inflation on average. Instead, it will tend to produce inflation that exceeds 2 percent. That’s a far cry from price stability.” ~ Alexander William Salter
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The Tragedy of the Monetary Commons
“While relatively well-functioning governments have managed to find mechanisms that mitigate the problem, it seems unlikely that Argentina and Brazil will be able to prevent a tragedy of the monetary commons given their history of money and fiscal mischief.” ~ Bryan Cutsinger
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Supply Constraints and Inflation, Revisited
“The Fed was late to realize nominal spending was surging and failed to correct course promptly when it realized it had made a mistake. Prices are higher today—and will remain permanently higher—as a consequence.” ~ William J. Luther
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Efforts to Depoliticize the Fed Will Likely Make Matters Worse
“These efforts to increase Congressional oversight are unlikely to depoliticize the Fed. Indeed, they are likely to make matters even worse.” ~ Nicolás Cachanosky
