Focus on Monetary Policy

Focus on Monetary Policy

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On October 4, Brian Sack, executive vice president of the FederalReserve Bank of New York, gave a speech in which he appeared to outline the means by which the Fed would engage infurther quantitative easing (sometimes dubbed QE2 in the financial press).

Also on October 4, Federal Reserve Bank of St. Louis economist William T.Gavin published a commentary expressing concern that the current federal funds rate will be held at itscurrent historically low level too long and thus become inflationary.

And on October 4, the Federal Reserve Board announced that Janet Yellen and Sarah Bloom Raskin had been sworn-in as new members,filling two of three long-vacant seats on the 7-member board.

An October 1 speech by Federal Reserve Bank of New York president William C. Dudley discussed theproblem of low and declining inflation for Fed policy and economicreadjustment. He suggested that the Fed’s desire for slightly higher inflationwould have more credibility if its current short-run target of 2 percent couldbe met. Economist Karl Smith commented in an October 4 post.

Also on October 1, Federal Reserve Bank of Dallas president Richard Fishergave a speech in which he expressed deep skepticism of the benefits of further Fed easing.One concern he has is that low interest rates in the U.S. seem to be fuelinginvestment in foreign countries rather than domestically. Economist Karl Smithcommented in an October 4 post.

And on October 1, Federal Reserve Bank of Chicago Charles Evans also gavea speech that addressed the issue of further Fed easing. He suggests that the economymay be stuck in a “liquidity trap” in which conventional monetary policy isineffective.

On September 29, Federal Reserve Bank of Minneapolis president Narayana Kocherlakota gave a speech that discussed the pros and cons of various proposals for monetary stimulus bythe Federal Reserve.

Also on September 29, Federal Reserve Bank of Boston president EricRosengren gave a speech in which he again reiterated the Federal Reserve’s willingness to engage infurther monetary easing, using unconventional methods if necessary, if economicconditions warrant.

In a September 28 speech,Federal Reserve Bank of Atlanta president Dennis Lockhart said that he does notforesee actual deflation, but believes the Fed will act to deal with it if itoccurs. (Note: price data are badly distorted and come in only with a long lag;by the time deflation is unmistakable, it may be too late to turn thingsaround, leading to a long period of Japan-style stagnation.)

I last posted items on this topic on September 29.

Bruce Bartlett is an American historian and columnist who focuses on the intersection between politics and economics. He blogs daily and writes a weekly column at The Fiscal Times. Read his most recent column here. Bartlett has written for Forbes Magazine and Creators Syndicate, and his work is informed by many years in government, including as a senior policy analyst in the Reagan White House. He is the author of seven books including the New York Times best-seller, Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy (Doubleday, 2006).

Bruce Bartlett’s columns focus on the intersection of politics and economics. The author of seven books, he worked in government for many years and was senior policy analyst in the Reagan White House.