Morning Must-Read: Paul Krugman: 2008 Federal Reserve Decision Making: The Urge To Tighten

Paul Krugman: The Urge To Tighten: “People are going through the Fed’s 2008 transcripts, and finding that most officials had no idea what was going down….

I’m a bit surprised, but that’s not the most surprising thing. What’s really surprising, and a bit dismaying, is the fact that a number of Fed officials were evidently focused on inflation, and some were eager to raise rates. That is, there were a fair number of people at the Fed — very much not, however, including Janet Yellen –who would, if they could, have echoed the ECB’s big mistake. What’s kind of shocking about this is that official Fed doctrine is to focus on core inflation, not react to short-run fluctuations in commodity prices. And the history of the past decade or so has showed that this is very much the right thing to do — headline inflation has swung widely, while focusing on core inflation has been a much better (though not perfect) guide…. Were Fed officials just not on board with this doctrine? Or was it part of a general urge to tighten, because central bankerly types just really dislike easy money?