Dear friends and colleagues:
My latest op-ed in The Washington Post argues that new Fed chair Kevin Warsh is right to end the central bank’s long and unsuccessful experiment with forward guidance.
On inflation, the Fed’s forecasting record has long been systematically poorer than that of the private sector. For horizons beyond two years, this should not be surprising: Fed officials invariably feel obliged to predict inflation returning to their 2 percent target. But the Fed’s practice of predicting its own future policy rates is worse than unhelpful. It can become positively pernicious, encouraging policymakers to validate past predictions in future rate votes, irrespective of changing conditions.
A quieter Fed is, therefore, a better Fed.
I hope you find the piece of interest. All best regards, |
