Mark Thoma Believes That the Fed Is Actually to the Technocratic Left of Where We Had Thought...
First, he sends us to Michael Derby of the WSJ writing about the incomprehensible Nsrayana Kocherlakota:
Economist's View: More Dovish Than We Thought?: Fed’s Kocherlakota Suggests Dissent Won’t Be Repeated, by Michael S. Derby: One member of the troika who opposed the Federal Reserve‘s recent decision to keep rates at rock bottom levels for two years suggested he won’t be repeating his disagreement at coming central bank gatherings. In a speech, Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said Tuesday “I see no reason to revisit the decisions” made last month, and added “I plan to abide by the August 2011 commitment in thinking about my own future decision.” The reason? With the Fed having made its pledge, “I believe that undoing this commitment in the near term would undercut the ability of the Committee to offer similar conditional commitments in the future.”... That said, the official spent a considerable amount of his speech — his comments came from remarks prepared for delivery before the National Association of State Treasurers in Bismarck, N.D. — explaining why he did not think the Fed made the right decision on its forward interest rate commitment. He indicated there was even a case to be made for going the other way on policy and tightening it...
I am trying to imagine what Kocherlakota thinks the case for tightening can possibly be. And the only thing I can think of is that he is simply mistaken about the logic of monetary policy--as he was mistaken last year about what is cause and what is effect.
And then Mark sends us to Robin Harding writing about Charles Evans:
A leading Fed policymaker made an aggressive call for more monetary stimulus on Tuesday as it emerged that staff of the US central bank have permanently cut their growth forecasts. In an interview with CNBC, Charles Evans of the Chicago Fed said that he would “favour more accommodation” and became the first policymaker on the rate-setting Federal Open Market Committee to explicitly countenance letting inflation rise above the Fed’s target of 2 per cent in the short-term....
And Mark comments:
I don't think it's a secret that I favor more accomodative policy as well. Finally, the minutes from the last FOMC meeting were released today, and they showed a divided committee, but more dovishness than most people expected.... The release of the minutes seems to have raised the expectation that more action is coming...
I don't know. My (current) read of Bernanke is that he is very averse to conflict within the Open Market Committee, and very unwilling to make policy without near-consensus. This leads me to think that the Federal Reserve will do very little: that the right-wing's arguments are unconvincing and anti-technocratic does not keep them from being vocal.
