The dots probably served a purpose post-GFC, in hammering home the seriousness with which the Fed meant what it said about staying at ZIRP for a long time.
But in framework where destination is supposed to trump path, they inevitably draw FOMC members back into a path discussion
But in framework where destination is supposed to trump path, they inevitably draw FOMC members back into a path discussion
https://twitter.com/jturek18/status/1438931935645028353
If I say "I'm not going to raise rates until unemployment is at 3% then that's a destination comment.
But the moment you ask me to make a forecast about *when* unemployment gets to 3%, you're implicitly asking me my growth forecast (path).
But the moment you ask me to make a forecast about *when* unemployment gets to 3%, you're implicitly asking me my growth forecast (path).
We've had years and years of ZIRP, and there's this perception that the Fed likes it this way and hates hiking and all that.
But it's been memoryholed the degree to which post-GFC, the public perception was the exact opposite, that the Fed hated ZIRP and wanted to hike ASAP.
But it's been memoryholed the degree to which post-GFC, the public perception was the exact opposite, that the Fed hated ZIRP and wanted to hike ASAP.
There were analysts in early 2009 penciling in the first post-GFC rate hike for late 2009!
The Fed really had to work -- through dots, public statements, etc. -- to counteract the then perception that it would be hiking rates as soon as the economy started showing any sign of life.
• • •
Missing some Tweet in this thread? You can try to
force a refresh
