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What are the new inflation hawks thinking? jordantimes.com - get the latest breaking news, showbiz & celebrity photos, sport news & rumours, viral videos and top stories from jordantimes.com Daily Mail and Mail on Sunday newspapers.
What are the new inflation hawks thinking? jordantimes.com - get the latest breaking news, showbiz & celebrity photos, sport news & rumours, viral videos and top stories from jordantimes.com Daily Mail and Mail on Sunday newspapers.
Back in 1992, Lawrence H. Summers, then the chief economist at the World Bank, and I warned that pushing the US Federal Reserve’s annual inflation target down from 4% to 2% risked causing big problems. Not only was the 4% target not producing any discontent, but a 2% target would increase the risk of the Fed’s interest-rate policy hitting the zero lower bound.
Our objections went unheeded. Fed Chair Alan Greenspan reduced the inflation target to 2%, and we have been paying for it ever since. I have long thought that many of our economic problems would go away if we could rejigger asset markets in such a way as to make a 5% federal funds rate consistent with full employment in the late stage of a business cycle.