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Thursday, January 14, 2016

'Permahawkery'

Paul Krugman in April 2014:

Permahawkery: Martin Feldstein warns us that the Fed isn’t taking the risk of rapidly rising inflation seriously enough. Certainly nobody can accuse him of that failing: he’s been warning about looming inflation for four years, eleven months, and two weeks, and hasn’t let the fact that inflation has kept falling below target alter his concerns in the slightest.
In fact, Marty’s new column is almost identical in its argument to what he wrote in April 2009: he warns that the Fed won’t pull back the liquidity it created when the economy recovers, and inflation will soar. ...
But being an inflation hawk means never having to say you’re sorry.

Paul Krugman in June of 2015:

The Inflationista Puzzle: Martin Feldstein has a new column on what he calls the “inflation puzzle” — the failure of inflation to soar despite the Fed’s large asset purchases, which led to a very large rise in the monetary base. As Tony Yates points out, however, there’s nothing puzzling at all about what happened; it’s exactly what you should expect when interest rates are near zero. ...
Anyway, inflation is just around the corner, the same way it has been all these years.

Martin Feldstein yesterday:

...the Fed is planning a path for short-term interest rates that is likely to raise the rate of inflation too rapidly in the next two years. The December FOMC minutes show that members expect to have a negative real federal-funds interest rate until sometime in 2017, much too low for an economy already at full employment. The danger is that very low interest rates in this environment would lead to a higher rate of inflation and higher long-term rates. The Fed could prevent that faster rise in inflation by increasing the federal-funds rate more rapidly this year and next. ...

    Posted by on Thursday, January 14, 2016 at 09:15 AM in Economics, Inflation | Permalink  Comments (44)


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