Monetary Policy
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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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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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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
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Five Questions for Fed Chair Jerome Powell
“After each meeting, Chair Powell holds a press conference where he takes questions from the media. Most reporters ask about the state of inflation or the Fed’s interest rate decisions, while important policy questions go unasked.” ~ Thomas L. Hogan
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How to Make Disinflation Less Scary
“Economists are correct in warning the public about the likely costs of disinflation. But leaders within and outside the Fed should not sit back and take these costs as given.” ~ Peter N. Ireland
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Can Congress Rein in the Fed?
“As long as we’re stuck with a central bank, we should give it an unambiguous mandate and watch it like a hawk. Monetary policymakers answer to the people’s representatives, in Congress assembled. Let’s remind them.” ~ Alexander William Salter
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Federal Reserve Operating Losses and the Federal Budget Deficit
“In 2023, the Fed will likely report tens of billions of dollars in operating losses as it raises interest rates to combat raging inflation. Will Fed losses increase the budget deficit as logic dictates they should, or will they be treated as an off-budget expenditure?” ~ Paul H. Kupiec & Alex J. Pollock
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The Inflation Tide Appears To Be Turning
“If monthly core inflation rates are at or below 0.2 percent in August and September, we might more confidently conclude that the Fed is back on track. Until then, we can only hope for the best.” ~ William J. Luther
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Why Will Inflation Remain So High For So Long?
“I cannot think of a good reason for inflation to remain high through 2024; but many bad reasons come to mind. The most likely explanation, in my opinion, is that Fed officials do not take their average inflation target very seriously.” ~ William J. Luther
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Understanding the Basics of Money Demand
“If nothing else, a cash-balances interpretation of the equation of exchange can help us better understand the relationship between the money supply and nominal income.” ~ Alexander William Salter
