Unfortunately, public discussion about the Fed often centers on the financial transactions that we undertake to achieve our goals. I think that this focus on our actions, as opposed to our goals, is always misleading and is especially so right now. The FOMC has provided a historically unprecedented amount of monetary accommodation. But the U.S. economy is recovering from the largest adverse shock in 80 years—and a historically unprecedented shockshould lead to a historically unprecedented monetary policy response. We should always judge the appropriateness of the Fed’s policies in terms of how the economy is doing relative to the two Main Street goals that Congress has set for the FOMC. Such a comparison does not suggest that monetary policy is currently too easy.That's the President of the Minneapolis Federal Reserve Bank, Narayana Kocherlakota conceding that Sumner (if we may allowed to mix our martial metaphors) Venit, Vidit, Vicit.
Unfortunately, Kocherlakota prefaces that concession with a misleading explanation of how monetary policy is conducted, with a focus on interest rates. HIs audience would have been better served if he'd instead explained that interest rates are not the price of money, and are a poor way to evaluate central bank policies.
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