Via Real Time Economics, a decidedly well crafted message
I am at the moment in a position that I’ve called essentially patient vigilance–meaning that I want to see how the economy evolves before drawing conclusions that more stimulus is needed and could actually have the effect where the benefits would outweigh the costs. I don’t rule it out.
By laying out the choice in this way Lockhart both loosens Fed policy and strengthens long term credibility. Essentially we see a re-weighting of the Fed’s loss function rather than an adjustment to its optimal rule or distribution in economic estimates.
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Friday ~ March 23rd, 2012 at 5:16 pm
fmb
I take the much-talked-about 2014 language as
1. not that the economy will be too weak,
2. not that the Fed will be “irresponsible”,
but rather
3. we anticipate signs of inflation of the sort that a proper flexible inflation targeting regime should ignore (for a while).
So the language is consistent with a constant optimal rule, just providing color on what such a rule requires in an unusual situation. The same message you describe in this post, though the official language is not as well-crafted.
Friday ~ March 23rd, 2012 at 5:39 pm
dwb
except the loss function is supposed to be balanced.
we’ve been in a state of patient vigilance for, i dunno, 3 years now at least. At what point do you say, hey these models that predict all this inflation are bunk??
Friday ~ March 23rd, 2012 at 8:27 pm
Becky Hargrove
At a crossroads – treading water – will the economists be in the water for the next macro round? Or is it just gonna be us little folks?