highs poses the toughest of policy challenges. Yet America’s Federal Reserve still hopes to meet it with an easy solution: bring the policy rate close to 3%, and as adverse supply shocks fade inflation will revert to the Fed’s 2% target. No need for a sharp monetary tightening à la Paul Volcker. No need to risk a recession or to trigger a significant rise in unemployment.
Yet this assumption might be well off the mark. Economists Thomas Laubach and John C. Williams have estimated that the real neutral rate of interest averaged around 2.5% during the 1990s and 2000s, before dropping to a 0-1% range after the financial crisis of 2007-09. A drop in America’s productivity growth and higher demand for safe financial assets may explain the decline. Productivity growth, however, has rebounded and averaged 2.4% during 2019-21—the same as the average of 1991-2007.
The second of the Fed’s shaky assumptions is that inflation expectations are still well anchored and that there is no sign of a wage-price spiral. In this telling price growth reverts to a “healthy” pace once exogenous shocks have dissipated. But much evidence already points in the opposite direction. Although wages have not kept up with surging inflation, they are growing at the fastest pace in 40 years, about 4-5%.
'The Fed has kept monetary policy too loose for too long' (?) Yes, since 2008. No seriously, monetarism is a joke, beside capitalism
Sonal Desai should stop making cockamamie statements.
They lost ALL credibility when they let Trump walk all over them. They also have some splainin' to do about repos.
Has leadership considered decreasing our debt by taking a hard look at what expenses get us closer to our goals and which ones make someone feel they r doing something?
Can y'all change your name to 'political rag written by dipshits with 80 iq' or something? You act surprised when the Fed pretends the Taylor rule isn't a thing, keeps interest rates below what they should be in years 8-10 after the last bubble,then have the gall to act surprised
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Fed officials raised possibility of ‘restrictive’ policy to fight inflation\n\t\t\tKeep abreast of significant corporate, financial and political developments around the world.\n\t\t\tStay informed and spot emerging risks and opportunities with independent global reporting, expert\n\t\t\tcommentary and analysis you can trust.\n\t\t Enduring stingflation stimalus ‘possibility’ of restrictive policy Inflation is at 8+ percent , and the grand strategy is to reach 2,5 to 3 percent interest rate to bring down inflation . Seriously ?
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