Focus on Monetary Policy

Focus on Monetary Policy

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In a December 28 blog post, Stanford economist John Taylor reiterated his belief that the Federal Reserve should focus only on inflation and ignore unemployment in setting monetary policy.

On December 27, the Federal Reserve Bank of St. Louis posted a study on the relationship between monetary policy and unemployment. It finds that since 1991 monetary policy has become less effective in reducing unemployment.

On December 22, the International Monetary Fund published a working paper arguing that the measure of inflation chosen for targeting by the monetary authority is important for stability.

And on December 22, the Federal Reserve published a working paper which found that the relationship between the money supply and inflation remains robust.

Also on December 22, Federal Reserve Bank of Atlanta economist David Altig posted an analysis of recent inflation trends, utilizing a variety of measures. All continue to show a declining trend.

A December 21 working paper from the Bank for International Settlements discusses the measurement of inflationary expectations, a critical data input for central bank policy.

In a December 9 Bloomberg poll, 39 percent of Americans said that the Federal Reserve should be more accountable to Congress and 16 percent said it should be abolished. Only 37 favored the status quo.

On December 8, Morgan Stanley economist David Greenlaw posted a commentary discussing reasons why monetary policy has not been very stimulative. He cites a heightened need for liquidity by banks, their need to raise capital, a lack of lending opportunities, increased risk-aversion, and the payment of interest on reserves by the Fed.

I last posted items on this topic on December 8.

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. 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.