The Fed has apparently gone from headline inflation targeting to inflation targeting, to employment targeting, to bubble and/or gas price targeting all in the span of six years. And most of it was done without making any definitive announcement. We’ve heard lip service being given to expectations management, but it doesn’t seem like the members of the FOMC really understand the power of Chuck Norris or that he goes wherever they send him – even if they don’t intend to be sending the “wrong signal.”
The unemployment rate ticked up last month. The jobless claims numbers are not looking much better. The FOMC voted in September 2012 to make a commitment to “substantial progress” on employment and defined the circumstances under which it would reconsider the easing program. It has a very long way to go (and it really doesn’t have to be that way). But for two meetings in a row, the minutes release has been crowded with chatter about altering the buying toward tapering or killing it.
I have to say that it’s a real head-scratcher as to why they would be saying anything about winding down the buying. Is core inflation >2.5%? No. Is unemployment < 6.5%? No. Is either of the stated milestones anywhere in sight? No. Oh, but silly me… Gas prices are back above $4 per gallon. Is the Fed considering targeting bubbles or the price of gas now? *shrug*
With Chuck Norris, it’s all in the saying and not so much in the doing – with the exception that the Fed has worked rather hard to destroy any credibility and any sign of predictability over the last handful of years, wandering down the monetary policy path like a drunken sailor. It’s amazing to me that some of the usual suspects are the same members talking about the main problem in the economy being uncertainty – and here they seem to rather enjoy contradicting the Fed’s commitment at every opportunity.
So, I wonder, if the name of the game is to wander about in the dark, why hasn’t the Fed wandered over NGDPLT? I mean if they can’t seem to figure out what it is they are doing in the first place, why not just trip over the right thing with both feet?
This mess is very frustrating to watch.
Hey! The FOMC has a new movie out that documents its struggles with monetary policy recently.