A good monetary policy follows inflationary expectations and not historical numbers.
Sentiment: POSITIVE
Monetary policy is not a panacea.
I do not think it is an exaggeration to say history is largely a history of inflation, usually inflations engineered by governments for the gain of governments.
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.
It is an established scientific fact that monetary policy has had virtually no effect on output and employment in the U.S. since the formation of the Fed.
During the 1970s, inflation expectations rose markedly because the Federal Reserve allowed actual inflation to ratchet up persistently in response to economic disruptions - a development that made it more difficult to stabilize both inflation and employment.
Monetary policy ultimately must be conducted in a pragmatic manner that relies not on any particular indicator or model but, instead, reflects an ongoing assessment of a wide range of information in the context of our ever-evolving understanding of the economy.
After a long period in which the desired direction for inflation was always downward, the industrialized world's central banks must today try to avoid major changes in the inflation rate in either direction.
To me, a wise and humane policy is occasionally to let inflation rise even when inflation is running above target.
When people begin anticipating inflation, it doesn't do you any good anymore, because any benefit of inflation comes from the fact that you do better than you thought you were going to do.
I'm just opposed to a pure inflation-only mandate in which the only thing a central bank cares about is inflation and not employment.