Despite the recent surge of inflation in the United States, the Federal Reserve is keeping the federal funds rate in a range far below what its own monetary-policy rules would prescribe. But since history shows that this deviation cannot last indefinitely, it would be better to normalize sooner rather than later.
STANFORD – Over the past few months, there has been a growing chorus of economic observers voicing concerns about the increase of inflation in the United States. Much of the commentary (including my own) has focused on the US Federal Reserve’s apparent continuation of easy monetary policy in the face of rising prices. Despite a sharp increase in the rate of money growth, the central bank is still engaged in a large-scale asset-purchase program (to the tune of $120 billion per month), and it has kept the federal funds rate in the range of 0.05-0.1%.
STANFORD – Over the past few months, there has been a growing chorus of economic observers voicing concerns about the increase of inflation in the United States. Much of the commentary (including my own) has focused on the US Federal Reserve’s apparent continuation of easy monetary policy in the face of rising prices. Despite a sharp increase in the rate of money growth, the central bank is still engaged in a large-scale asset-purchase program (to the tune of $120 billion per month), and it has kept the federal funds rate in the range of 0.05-0.1%.