Evening Must-Read: Ryan Avent: Monetary Policy: Try Overshooting for Two Years
Ryan Avent: Monetary policy: Try overshooting for two years: “Though it would be the right thing to do,
I don’t expect the Fed to announce a new 3% inflation target or 5% wage growth target, or declare its intention to make up half of the shortfall in nominal output relative to the pre-crisis trend. Though it would be a very good thing to do, I don’t expect them to say that, in order to defend the integrity of their 2% inflation target, they intend to make up the shortfall in inflation accumulated over the past two years with an 18-month period of overshooting. But while I don’t expect those things, I don’t think they are entirely outside the realm of possibility, nor do I think that the Fed tied its hands forever in January of 2012.