Monetary policy: Unconventional policy forever

Posted: March 20, 2013 in economy
Tags: , ,

THE Federal Open Market Committee concluded its two-day meeting today with a nothing-burger of a statement. Very little changed in its wording on the state of the economy, and both asset purchases and interest-rate guidance remain as they were before. Things continue on as they have. New economic projections released with the statement suggest the Fed expects a bit less output growth and a bit less inflation than it previously did over the next few years, with the unemployment moving toward its long run range (between 5.2% and 6.0%) a little bit faster. Nothing to see here.That’s a problem. It’s easy to lose perspective on the state of the labour market, given that our expectations slowly adjust over time and that relative to other large economies America doesn’t look so bad. But the recovery is nearly four years old, and the unemployment rate remains well above the pre-recession level. And the Fed doesn’t anticipate unemployment returning to its natural level until 2015 at the earliest. It should go without saying that seven full years with unemployment above normal is a sign of a pretty lousy monetary-policy performance.A good part of the explanation for that miserable showing can be summed up in three words: zero lower bound (ZLB). Since December of 2008, when the Fed cut the fed funds rate target to roughly zero, the FOMC has been scrapping to try and boost recovery …

via Economic Crisis http://www.economist.com/blogs/freeexchange/2013/03/monetary-policy-2?fsrc=rss

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s