You have been prescient and consistently accurate questioning great influencers screaming the Fed was behind the curve. Getting to full employment from 14.7% in April 2020 is an extraordinary achievement and once again you are so appropriately asking why aren’t our senators applauding. This is after all about people and putting people first.
Bingo! on each point you've made, especially the one about the "optionality" in the Taylor Rule. (If I may say so, at my own expense, you have underpriced your blog!). Another thing, if I may, about the Taylor Rule. Unemployment can go up, say from 3.5% to 4.5%, in three ways. 1) Layoffs 2) Improved participation rate 3) Mix of (1) and (2). If you set aside the inflation segment of the Rule for the moment, it would recommend only one course of action for all. But the underlying economy is different in each scenario. An economy where unemployment is up due to mass layoffs is different from one in which unemployment is up because people are drawn into the labor force when jobs become easier to find. They are counted as unemployed during search.
Who, except Taylor, thinks the Taylor rule is optimal? (And the Fed's mandate does not say minimize unemployment, but pot maximize employment, anyway.) The mandate ought to be understood as requiring the Fed to shoot for maintaining an optimum rate of inflation that maximizes discounted real income, taking into account the costs of inflation that is both too high and too low, costs that arise from upward and downward rigidities in relative prices and the time required for market participants to approximate quasi-equilibrating relative prices. The mandate is really silent about how quickly the Fed should attempt to return inflation to the (optimum) target. That would depend on the costs of over or under target inflation and the risks of overshooting in the opposite direction.
Agreed, but the TIPS market isn't dispositive. Core inflation (with rents properly adjusted and events 6 months or more in the past ignored) might get stuck at around 4%. But I'm betting it will continue its trend downwards. My reply to the more hawkish Larry Summers: https://twitter.com/MeasureMeasure/status/1664717135229370368?s=20
"Had the Fed moved earlier, we would not have had as rapid and complete a recovery from the plague depression." I think September 2021 was the time to move. That what the blip in TIPS says. But earlier when the Fed was saying "temporary" it should have added "because we will make sure it is temporary, no more than needed to maximize employment." And the Administration should never have said anything except that it has full confidence that the fed can achieve its targets.
You have been prescient and consistently accurate questioning great influencers screaming the Fed was behind the curve. Getting to full employment from 14.7% in April 2020 is an extraordinary achievement and once again you are so appropriately asking why aren’t our senators applauding. This is after all about people and putting people first.
I agree. But many others do not...
Because they wanted to claim part of the credit, rather than just praising the Fed for doing its job?
Bingo! on each point you've made, especially the one about the "optionality" in the Taylor Rule. (If I may say so, at my own expense, you have underpriced your blog!). Another thing, if I may, about the Taylor Rule. Unemployment can go up, say from 3.5% to 4.5%, in three ways. 1) Layoffs 2) Improved participation rate 3) Mix of (1) and (2). If you set aside the inflation segment of the Rule for the moment, it would recommend only one course of action for all. But the underlying economy is different in each scenario. An economy where unemployment is up due to mass layoffs is different from one in which unemployment is up because people are drawn into the labor force when jobs become easier to find. They are counted as unemployed during search.
Who, except Taylor, thinks the Taylor rule is optimal? (And the Fed's mandate does not say minimize unemployment, but pot maximize employment, anyway.) The mandate ought to be understood as requiring the Fed to shoot for maintaining an optimum rate of inflation that maximizes discounted real income, taking into account the costs of inflation that is both too high and too low, costs that arise from upward and downward rigidities in relative prices and the time required for market participants to approximate quasi-equilibrating relative prices. The mandate is really silent about how quickly the Fed should attempt to return inflation to the (optimum) target. That would depend on the costs of over or under target inflation and the risks of overshooting in the opposite direction.
Agreed, but the TIPS market isn't dispositive. Core inflation (with rents properly adjusted and events 6 months or more in the past ignored) might get stuck at around 4%. But I'm betting it will continue its trend downwards. My reply to the more hawkish Larry Summers: https://twitter.com/MeasureMeasure/status/1664717135229370368?s=20
"Had the Fed moved earlier, we would not have had as rapid and complete a recovery from the plague depression." I think September 2021 was the time to move. That what the blip in TIPS says. But earlier when the Fed was saying "temporary" it should have added "because we will make sure it is temporary, no more than needed to maximize employment." And the Administration should never have said anything except that it has full confidence that the fed can achieve its targets.