Same stuff, different day are the watchwords for the freshly released FOMC statement. And of course, as Kevin Warsh informs us in his paper about Fed decision making that there are no less than 60 of the nation’s crème de la crème economic minds in the room during deliberations, I find it a bit strange that nobody catches how silly this sounds coming from an inflation-targeting central bank.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability…. Inflation is anticipated to remain near its recent low level in the near term, but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of earlier declines in energy and import prices dissipate. The Committee continues to monitor inflation developments closely.
When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.
Inflation is low. It’s been too low long since before the collapse in oil prices. They’ve been monitoring inflation developments closely for years with little change. I am not entirely sure why they think inflation will ever rise to “normal” levels if they don’t do something other than have an itchy finger on that one-way screwdriver of tightening.
The other bit that I no longer have the nerve to be shocked over is in the opener, they blame low inflation on oil in part. What is the other part; and if it is actionable, why isn’t there any action?
With as much care as they supposedly put into what goes into the statements, it’s strange that they left in the part about reinvesting the proceeds from the portfolio when there is at least one other important thing missing: The status of the reverse repo that has been regularly conducted since November of last year. But maybe they decided that they didn’t want to appear conflicted since these two things at the very least negate each other in effect.
If I were grading this statement as assignment given to a student, I’d mark it incomplete. These people aren’t doing what they told us they’d do in January 2012, and they leave out information that is important to planning.
It’s really too bad that Sen. Shelby’s Fed reform plan had the teeth ripped out of it because these people need a hefty dose of accountability while the nation suffers under the weight of the enormous opportunity cost of inaction.