Over at Equitable Growth: The argument that ought to be decisive in convincing the Federal Reserve as currently structured to not tighten, but loosen, over the next year is this: in order to establish credibility that its 2%/year inflation target is an average, and not a ceiling, it needs to overshoot it for a period of time in the near future.
The other arguments--that the Federal Reserve should be aiming for 4%/year inflation or 6%/year nominal GDP growth, that it needs to explore the policy space in order to learn more about the current structure of the economy and the location and slope of the Phillips curve (if any), that it needs to act responsibly as the global monetary hegemon rather than irresponsibly as an organization with a narrow focus exclusively on the US internal balance--really ought to be decisive too if the Federal Reserve Open Market Committee were properly constituted. But given how the Federal Reserve Open Market Committee is currently constituted, they are not.
But the need to establish credibility that the target is 2%/year rather than ≤2%/year really ought to be decisive. READ MOAR
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J. Bradford DeLong on September 14, 2015 at 09:07 AM in Berkeley, Streams: Comment of the Day | Permalink | Comments (0)
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