Thread by @GeorgeSelgin

Thread: It's worth contrasting Bill Dudley's recent claim that, under the Fed's "floor" operating system, the fed funds rate "no longer plays a meaningful role in the economy, and requires occasional fiddling to keep it in line," with his earlier defense of the the floor system.

Back in 2018, he argued for retaining that system on the grounds that "it is operationally much less complex than a corridor system" since "the setting of IOER is largely sufficient to maintain the federal funds rate within the FOMC’s target range" newyorkfed.org/newsevents/spe…

Now, he has belatedly admitted having praised the system for hitting a "meaningless" target! In fact, it given how the fed funds market now works, it can hardly fail to hit it! And yet it must still tweak its administered rates to do so!

In fact, I criticized Dudley back then precisely on the grounds upon which he now criticizes fed funds rate targeting: alt-m.org/2018/05/03/dud…

So there.