QE Magic, Used Cars, and Omicron: Tapering While Preserving Optionality
The policy mistake worth worrying about isn’t the speed of taper per se; it's the signal that taper sends about the timing of liftoff in interest rate policy.
Fed Policy
190 postsInflation Expectations: Three Stories in Search of Evidence
Despite widespread use by commentators and policymakers, the models commonly used to argue for the importance of "inflation expectations" are difficult to confirm empirically, and risk a hawkish policy bias.
Expecting Inflation: The Case of the 1950s
Whenever inflation becomes a part of political or economic discourse, policymakers and commentators instinctively reach for narratives and models drawn from the experience of the 1970s inflation. However, these models offer little explanation for even adjacent experiences of inflation.
Beyond The Phillips Curve: A Dynamic Approach To Communicating Assessments of “Maximum Employment”
Given the Fed’s recent framework revisions and forward guidance commitment to maintain current interest rates until “maximum employment” is achieved, the Fed’s communication with respect to its assessment of “maximum employment” is overdue for a clarification.
Inflation: The Good, The Bad, and The Transitory
The Framework Review and Forward Guidance center labor market outcomes over inflation in evaluating interest rate policy. However, the Fed haven't clarified how they will evaluate inflationary dynamics under the new regime.
