7 years “crying wolf”

Plosser started crying wolf back in July 2008, at the peak of oil prices, when the FF rate was 2%:

Keeping policy too accommodative for too long worsens our inflation problem. Inflation is already too high and inconsistent with our goal of — and responsibility to ensure — price stability. We will need to reverse course — the exact timing depends on how the economy evolves, but I anticipate the reversal will need to be started sooner rather than later. And I believe it will likely need to begin before either the labor market or the financial markets have completely turned around. [the “sooner rather than later” mantra appears in 90% of his subsequent speeches!]

And this is how the inflation outlook evolved from the time he spoke:

Plosser Farewell

Today, leaving his “farewell” message:

One of Mr. Plosser’s persistent concerns about Fed stimulus over the last few years is that it would set the stage for surging inflation. Instead, price pressures have remained persistently short of the Fed’s 2% price target and are in fact getting weaker, rather than stronger, despite solid job market gains and decent growth.

“The jury is still out” when it comes to the inflation outlook, Mr. Plosser said. “We will have to see as we exit this period of extreme accommodation, seven plus years of zero interest rates, whether we will have inflation—inflationary consequences from that. That is something we still don’t have an answer to,” the official said.

And shows he´s not in the least repentant:

Mr. Plosser told the television channel he didn’t regret any of his dissenting votes. While the votes may not have altered the outcome of central bank policy, he said they helped shape the debate and proved the public officials were actively considering their actions.

Bottom line: His contribution while FOMC participant has been damaging. He won´t be missed!

PS: From Matt O´Brien:

Inflation is just a scare story people old enough to remember the 1970s tell.

One thought on “7 years “crying wolf”

  1. Compare the Plosser years to any other 10-year period since the Great Depression. The Plosser years are the worst. Yet Plosser wanted tighter money.
    It is monomania masquerading as monetary policy.

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