It’s not the perfect Market Monetarist bazooka, but the statement released by the FOMC this afternoon reflects quite a bit of progress from just a year ago. A year ago, we were hearing cryptic discussions about inflation fighting credibility, and costs and risks to unconventional monetary policy. Today we are hearing a firm intention to do what it takes to get a recovery with open-ended QE along with Bernanke talking about the need to return to trend growth in his press conference. I am very pleased indeed, and everyone on the FOMC, except for Lacker, gets a big cheer of appreciation from dajeeps along with a hearty high-five.
Scott Sumner has some detailed analysis of the FOMC decision today. He has a few posts so the link will direct you to his main page and you can look at the list and pick what part you’re interested in reading. Alternatively, you can check out Lars Christensen’s post that has a few links to other commentary as well.
PS: It’s beyond words how much the opening statement made by Bernanke at his press conference today means to many people I know.
Here’s Mr. Bernanke:
As you know, the Federal Reserve conducts monetary policy under a dual mandate from Congress to promote maximum employment and price stability. The United States has enjoyed broad price stability since the mid-1990s and continues to do so today. The employment situation, however, remains a grave concern. While the economy appears to be on a path of moderate recovery, it isn’t growing fast enough to make significant progress reducing the unemployment rate. Fewer than half of the 8 million jobs lost in the recession have been restored. And, at 8.1 percent, the unemployment rate is nearly unchanged since the beginning of the year and is well above normal levels.
The weak job market should concern every American. High unemployment imposes hardship on millions of people, and it entails a tremendous waste of human skills and talents. Five million Americans have been unemployed for more than six months, and millions more have left the labor force—many of them doubtless because they have given up on finding suitable work. As the skills of the long-term unemployed atrophy and as their connections to the labor market wither, they may find it increasingly difficult to get good jobs, to their and their families’ cost, of course, but also to the detriment of our nation’s productive potential.