I will be the first to say that it is always difficult to get monetary policy just right. But the Fed's analytical prowess is top-notch, and our forecasting record is second to none.
Sentiment: POSITIVE
Economic forecasting has actually got pretty good over the years, though admittedly, we don't always get it right.
First, I think the science of monetary economics has clearly gotten better.
It is hard to have great confidence in predicting what market reactions to Fed decisions will be.
The Fed's policy choices can always be debated, but the quality and commitment of the Federal Reserve as a public institution is second to none, and I am proud to lead it.
True enough, the Fed needs radical reforms. In particular, it needs to replace its failed forecasting models and be rid of the academics who overwhelm the Fed system.
A good monetary policy follows inflationary expectations and not historical numbers.
It's true that the Federal Reserve faces a lot of political pressure and is unpopular in many circles.
We need to keep in mind the well-established fact that the full effects of monetary policy are felt only after long lags. This means that policy makers cannot wait until they have achieved their objectives to begin adjusting policy.
I think the Fed is not designed to have effective tools to deal with the economy. It should settle for just controlling the money supply. And - if it insists, it can worry about inflation.
The Treasury has enough trouble with forecasts even when they are trying to get them right.