May 23, 2016

IT'S AESTHETICS, NOT ECONOMICS:

The next Fed rate hike and 'goat droppings': How they're related (Jared Bernstein, May 23, 2016, Washington Post)

Though there will always be critics, the broad consensus among economists is not only did the Fed perform its countercyclical function well in the recession, but since around 2010, when the tea-party-addled Congress checked out on economic (and most other) policy, the Fed's also been the only game in town.

Lately, however, its campaign to "normalize" the interest rate it controls -- i.e., raise it back up to where it usually is at this point in an economic expansion -- has been criticized by some Fed watchers, especially those of us who a) worry that Fed rate hikes will block to the path to full employment, which we still haven't reached, b) want to see less-advantaged workers benefit from growth, and c) see little in the way of inflationary threats.

For Fed officials who've spoken out on this point, like Jeffrey Lacker in this recent interview, the rationale for hiking seems to come from a somewhat vague sense that rates have been low long enough and the U.S. economy, if not many others, is finally firming up.

Meh. I'm not a central banker, but some this sounds like what I think of as MONETary policy, more impressionism ("getting behind the curve," "reducing uncertainty," rates are below where they "ought to be") than hard-core analysis of the key relations between the variables in question.

Posted by at May 23, 2016 4:02 PM

  

« DAVID ALWAYS BEATS GOLIATH: | Main | ONLY ASSAD, PUTIN AND THE NEOCONS...: »