Must-Read: Lael Brainard: The “New Normal” and What It Means for Monetary Policy

Must-Read: Now can somebody please tell me why this is a minority and not the consensus view of the FOMC?:

Lael Brainard: The “New Normal” and What It Means for Monetary Policy:

Several features of the “new normal”… appear particularly noteworthy for our policy deliberations:

(1) Inflation Has Been Undershooting, and the Phillips Curve Has Flattened…. (2) Labor Market Slack Has Been Greater than Anticipated…. (3) Foreign Markets Matter, Especially because Financial Transmission is Strong…. (4) The Neutral Rate Is Likely to Remain Very Low for Some Time…. (5) Policy Options Are Asymmetric…. From a risk-management perspective, therefore, the asymmetry in the conventional policy toolkit would lead me to expect policy to be tilted somewhat in favor of guarding against downside risks relative to preemptively raising rates to guard against upside risks…. It will be important to assess whether our current policy tools are adequate to respond to negative shocks and, if not, what adjustments would be most appropriate…. For the time being, the most effective way to address these concerns is to ensure that our policy actions align with our commitment to achieving the existing inflation target, which the Committee has recently clarified is symmetric around 2 percent–and not a ceiling–along with maximum employment…