Random question for people who worry that the Fed could "run out of bullets" because the policy rate is already fairly close to zero.
Couldn't the Fed not stimulate further by saying something like "We're never going to hike again until the unemployment rate falls below 2.5%"?
Couldn't the Fed not stimulate further by saying something like "We're never going to hike again until the unemployment rate falls below 2.5%"?
Seems like there's a virtually unlimited number of forward guidance approaches that could be powerful and blunt?
"We're not going to worry about inflation until we see 6 prints in a row of core CPI over 3%." That's another one. Seems like there's plenty of bullets.
"We're not going to worry about inflation until we see 6 prints in a row of core CPI over 3%." That's another one. Seems like there's plenty of bullets.
I've always thought that, in retrospect, in 2010 after the Fed was at zero, the Fed should've just announced a multi-year vacation. No meetings, with the message that they'd check in again in 2015.
Anyway, this wouldn't be my preference because I think fiscal policy is more powerful, but I don't think the limits to the Fed's efficacy should be viewed in terms of some imaginary number of available bullets.
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