How can this exercise be in any way edifying?

HILSENRATH’S TAKE: HOW HIGH WILL FED PUSH RATES?

Investors are especially focused these days on where the Federal Reserve’s target interest rate is likely to end up in the years ahead. During the tightening cycle that ended in 2006 the Fed pushed its target fed funds rate up to 5.25%. In 2000 it pushed it to 6.5%. Fed officials say they don’t expect rates to go very high this time around because the economy will remain fragile for years after the 2008 financial crisis.

The ‘edifying’ exercise should be to find out why the “economy will remain fragile for years”. And while it remains “fragile” it is very likely rates will remain low.

Notably, the incoming Vice Chairman once said:

In the short run, monetary policy affects both output and inflation, and monetary policy is conducted in the short run–albeit with long-run targets and consequences in mind. Nominal- income-targeting provides an automatic answer to the question of how to combine real income and inflation targets, namely, they should be traded off one-for-one

And when you look at images such as these, the ‘solution’ jumps at you!

Hilsenrath Exercise

 

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