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Kent's avatar

I remain perturbed that many prominent economists, excluding Krugman & DeLong, are fanning inflation fears. Most Americans live in fear of crime, immigration, inflation, unemployment, pickled beets (probably), and who knows what else.

I know nuance doesn't get clicks, but we desperately need statements of basic facts before we run into the arm of a dictator.

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Thomas L. Hutcheson's avatar

"Am I wrong to wish that the Federal Reserve had cut short-term interest rates this spring in order to keep the Ten-Year Treasury real rate around +1.5%?"

Yes. You should have wished for the Fed to cut the EFFR in December _because appeared that it was going to be successful in returning PCE inflation to 2%_ [That's what TIPS traders thought] and there have been 5 opportunities since then to raise, lower or leave the EFFR unchanged as new data become available. You should not wish the Fed to target any interest rate.

Is r* supposed to be a long-term rate? I thought it was the shorter policy intervention rate (a synecdoche for the entire vector of policy instruments the Fed might use to raise or lower inflation) that KEEPS inflation _at_ target, not what RETURNS it _to_ target.]

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