Critical to the Fed successfully achieving maximum employment over the short run and the longer run is a commitment to, and a communication of, “maximum employment” that is Credible, Broad, and Inclusive.
If the Fed wants to stay true to the "maximum employment" component of its forward guidance, and the "broad and inclusive" nature of that goal, it is imperative that their interest rate policy actions reflect a full recovery on both of these measures.
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.
Healthcare policy interventions could provide downward pressure on core PCE both in 2022 and in the years ahead. Given the salience of inflation, disinflationary healthcare policies should be a key priority for Congress and the Biden Administration alike.
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.
