At the Cato Institute Monetary Policy Conference, Part 3

Photo Credit: joiseyshowaa
Photo Credit: joiseyshowaa

Press conference w/Bullard: embargoed until end of talk. ?[everything is a paraphrase here, and I can’t get everything down, as with everything at this conference]

Neo-Fisherian ideas are interesting and worthy of further talking about, but don’t take them too seriously.

The longer you are at a zero bound — the neo-Fisherian effects get larger.

Q: new monetary consensus of a?low nominal world. ?Won’t the abnormal become normal?

B: ECB and Japan still doing QE. ?We are now?trying to normalize.

Q: Balance sheet. edging up rates?

B: liftoff, then review the balance sheet. ?Gradualism will be the normal policy, more shallow than 1994 or 2006. ?Won’t have credibility on gradualism until the second move. ?More on gradualism — not a constant slope, but state-dependent.

Q: [Bloomberg] ?Why go gradually?

B: He has higher dots. ?Forecasts lower unemployment. ?Need to see how things evolve.

Q: Wan’t it difficult for the Fed to veer from prior policy moves?

B: You have to retain your options, and move accordingly. ?Labor markets could tighten considerably.

Q: [Dow Jones] Any concern that you will have unanticipated effects on the ECB and World?

B: No. Those are priced in anyway.

Q: keeping the markets calm?

B: we won’t give a total roadmap, we can’t. ?It won’t be like 1994. ?We will communicate more.

Q: Chorus of criticism from the GOP?

B: Fed has been in the middle of the action since the crisis. ?Adds to a healthy debate on priorities for monetary policy. ?What should we have has targets…

Q: Is the FOMC shifting its official inflation measure? ?Dallas Fed Trimmed Mean?

B: Trimmed mean is better statistically. ?Target should be overall inflation.

Now it is time for Lacker

Jury is still out on how we handled on 2008-9. ?Not surprised on the political furor.

Q: What will happen when FOMC raises rates?

L: should be smooth. ?News will be in the announcement. ?Shouldn’t be a surprise.

Q: ??

L: My dots are above median. Should be a flatter cycle.

Q: Regarding his paper, if the price level is all that matters, why not have the 2% more prominent?

L: Can’t reject the possibility that chance is keeping inflation low, and a slow-moving component. ?Communications are pretty clear now.

Q [marketwatch] FOMC behind curve?

L: We might be, we might not.

Q: Possible that Fed won’t be gradual?

L: Possible. ?Consider inflation 2003-2004 to 2007, we got behind on inflation.

 

Q: any reform ideas you might support?

L: IOER given to Board, should go to the FOMC.

Q: should a Taylor rule be mandated?

L: wouldn’t mandate it, we even consider them, and maybe we should discuss why we differ from them.

Q: your view on the balance sheet?

L wind down quickly, if possible.

Q: my question on whether globalization and technology affecting the ?labor share and thus monetary policy?

L: models could take account of that if they wanted to — depends what you think the goals of policy are. ?If inflation only, a focus on employment might have an effect, or we could end up pursuing pushing for unemployment that we can’t achieve.

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