Oh no… no… no! Did they hear me in Transylvania? I wonder because when reading this Scott Sumner post on Econlog, I had a sudden, boisterous reaction to:
If you do succeed in boosting wage growth [with monetary policy], it will likely also cause inflation to overshoot its target, forcing the Fed to suddenly tighten monetary policy.
Why is it that when inflation is over-shot it means the apocalypse is neigh, and hell and damnation is afoot and the Fed is “forced” to do something really undesirable and harmful, but undershooting has no sort of “force” associated with it?
I am aware I am making a strawman out of what Sumner said because he didn’t say undershooting is okay and he probably didn’t even mean what he wrote as literally as he wrote it. But this seriously begs the question: Should we market monetarists give the Fed a pass in the erroneous calculation of two wrongs make right?
I can only speak for myself, and this MM’er has never bought on to the idea that inflation ceilings are a healthy way to manage MP and will never concede anything on the fact that two wrongs always add up to two wrongs. The Fed should never ever do anything with suddenness and if it were possible to force the Fed to do anything based on target-missing, I imagine that the Great Recession may never have happened.
The Fed is not forced to do anything, not even to follow the law (they are a herd of cats up there doing whatever they want!), and it is a grave mistake to suggest that sudden tightening come what may is ever anything close to a reasonable response especially when it isn’t forced to ease policy on any account.
PS: My apologies to all the meowers out there, no offense intended.