Topic: Monetary Policy

Supply Constraints and Inflation, Revisited

– February 3, 2023

“The Fed was late to realize nominal spending was surging and failed to correct course promptly when it realized it had made a mistake. Prices are higher today—and will remain permanently higher—as a consequence.” ~ William J. Luther

Government, Monetary Policy, Regulation

Efforts to Depoliticize the Fed Will Likely Make Matters Worse

– February 3, 2023

“These efforts to increase Congressional oversight are unlikely to depoliticize the Fed. Indeed, they are likely to make matters even worse.” ~ Nicolás Cachanosky

Government, Inflation, Monetary Policy

Should the Fed Stop Tightening?

– February 2, 2023

“The Fed should stay the course. Putting the nail in the inflationary coffin is more important than hyper-calibrating a ‘soft landing.’ But it likely won’t be long before we’re done.” ~ Alexander William Salter

Government, Inflation, Monetary Policy

The FOMC: To Pause or Not to Pause?

– February 2, 2023

“Given uncertainties surrounding the unusual stimulus and the lagged effects of monetary policy, it would be prudent to hold the Federal Funds rate constant for a few months and see how the economy responds to recent policy.” ~ Gerald P. Dwyer

Government, Inflation, Monetary Policy

Headline Inflation Falls, But Core Inflation Remains Elevated

– January 30, 2023

“At this point, it seems likely Fed officials will move forward with a 25 basis point hike. But how high they will push rates this year and how long they will keep rates high remain open questions.” ~ William J. Luther

Financial Markets, Government, Monetary Policy

Rising Use of the Fed’s Discount Window Raises Questions

– January 25, 2023

“The fact that the amounts being borrowed at the discount window are rising in an oscillatory fashion with progressively higher ‘highs’ and higher ‘lows’ hints, while not conclusively, that the amounts being borrowed are increasing as the Fed increases rates.” ~ Peter C. Earle

Inflation, Monetary Policy, Video

Beware the Soft Landing Narrative (Video)

– January 23, 2023

“Earle thinks a more charitable version of the Fed’s handling of monetary policy over the last three years might emerge, resulting in less public skepticism about the limits of monetary policy.” ~ AIER

Government, Inflation, Monetary Policy

Welcome the Disinflation, Beware the Narrative

– January 13, 2023

“Let us all hope that disinflation proceeds expeditiously and, if it does, we remain mindful that the outcome is in spite of, rather than owing to, central bankers and their narrow assortment of lagging and unpredictable policy instruments.” ~ Peter C. Earle

Government, Inflation, Monetary Policy

FOMC Ratchets Up Inflation Projection

– January 2, 2023

“FOMC member projections suggest that inflation will come down only gradually over the next two to three years and that the price level will remain permanently elevated.” ~ William J. Luther

Economic Education, Inflation, Monetary Policy

Putting Aggregate Demand and Aggregate Supply to Work

– December 30, 2022

“Economists use aggregate demand and aggregate supply (AS-AD model) to understand how inflation and real income growth are jointly determined.” ~ Bryan Cutsinger & Alexander William Salter

Central Banking, Economic Education, Inflation, Monetary Policy

Does Government Spending Lead to Inflation?

– December 27, 2022

“The key point is that it is the central bank’s willingness to help finance government spending, not the spending itself, that drives inflation. In short: inflation remains a monetary phenomenon.” ~ Bryan Cutsinger

Central Banking, Financial Markets, Monetary Policy

Does the Fed Control Interest Rates?

– December 26, 2022

“The Fed is a failed institution in need of major reforms. But we won’t make the right changes if we don’t understand the basic relationship between central banks and capital markets.” ~ Alexander William Salter