Focus on Monetary Policy

Focus on Monetary Policy

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In a November 23 commentary, Harvard economist Robert Barro expresses concerns about the Fed’s exit strategy from quantitative easing. He thinks raising the interest rate paid on reserves will be less effective in terms of tightening monetary policy than the Fed believes.

In a November 19 commentary, Morgan Stanley economist Spyros Andreopoulos compared current economic conditions to those of the 1970s to determine whether inflation/stagflation is likely to reappear. His conclusion: “In the medium term the risks are skewed towards an overheating of the global economy, elevated commodity quotes and ultimately higher inflation.”

On November 18, Peterson Institute economist Adam Posen presented a paper on central bank policy regarding asset bubbles. He doesn’t think it’s possible for central banks to determine the existence of bubbles with enough certainty or far enough in advance to “lean against the wind” effectively.

In a November 18 speech, Federal Reserve Bank of Minneapolis president Narayana Kocherlakota defended the Fed’s recently announced policy of quantitative easing.

Also on November 18, Federal Reserve Bank of Cleveland president Sandra Pianalto gave a speech that also defended quantitative easing on the grounds that inflation is extremely low and the risks of doing nothing outweighed the risks associated with the Fed’s actions.

And on November 18, Federal Reserve Bank of Philadelphia president Charles Plosser addressed the Cato Institute’s annual monetary conference. He said that the Fed should be wary of raising interest rates in response to perceived asset bubbles. “This is a policy that is easy to get wrong and fraught with risks,” he said.

On November 18, the Federal Reserve Board announced that historical records of its meetings as far back as 1936 had been posted online.

In a November 17 blog post, Harvard economist Greg Mankiw, who served as chairman of the Council of Economic Advisers under George W. Bush, took issue with Republicans who reflexively oppose the Federal Reserve’s policy of quantitative easing as inflationary. It is a “good idea” and a “step in the right direction,” Mankiw says.

Also on November 17, former Federal Reserve Board governor Larry Meyer was highly critical of Republicans for criticizing the Fed in a partisan manner. He says that the Republican economists who signed a recent letter attacking the Fed “undermined their credibility.”

On November 16, Federal Reserve Bank of Atlanta president Dennis Lockhart gave a speech in which he discussed the rationale for the Fed’s policy of quantitative easing.

In a November 15 speech, Federal Reserve Bank of San Francisco vice president John Williams defended the Fed’s policy of quantitative easing by pointing to the similarities between the U.S. and Japan, which has been suffering from deflationary stagnation for almost 20 years.

I last posted items on this topic on November 17.

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.