It´s not only Stanley Fischer, but many others at the FOMC that express ‘confidence’ about inflation moving up to the 2% target (ceiling?).
That would be a ‘miracle’ given the behavior of NGDP since January 2011. Both on a YoY basis and on the much smoother accumulated over 12 months basis, NGDP growth has averaged 3.8%, with a recent tendency to decline. It´s more likely that inflation will go lower, not higher.
The rate hike “threat” that has been going on for more than one year has noticeably tightened monetary policy, and is reflected in the downtrend in NGDP growth. If they were smart they would loosen monetary policy even with rates remaining at “zero”. Instead of continuously threatening to raise rates, they could promise a higher level of NGDP!
PS If the Fed continues “threatening” it will likely move up the date of the next recession!
Inflation-o-phobes see inflation everywhere, under every rock and bush, around every corner, even lurking in the darkness of night. I hear the condition is highly treatable. The only complication is that the first step in obtaining treatment is admitting one has a problem of seeing things that aren’t really there, and it takes courage to do so.
Is it any wonder? There are institutions in the US which the government gives tax breaks to which encourage people to see things that aren’t there from the time they are small children. Doing so is considered to be good and noble while doing the opposite (apportioning confidence to the evidence) is often viewed with suspicion and distrust. As far as I can tell, there’s really no incentive for the afflicted to admit there’s any problem whatsoever. Perhaps an intervention is in order. I understand that the Socratic method can be effective. Start with asking “What evidence would convince you that you’re wrong?” Typically there isn’t any. But admission of that fact in itself may get the wheels spinning.
I’m serious: next time you encounter an inflation-phobe, try that out. I’m super curious what response you’ll get. I always imagine I’m asking Peter Schiff that question. I have a suspicion his response would sound something like Mr. Ham’s response here.
The truly perverse and disturbing thing is that this attitude is often admired as “sticking to your guns” or being “rock solid in your beliefs” or other such nonsense.
Is there really any significant difference between hard core inflation-phobes and “moon loons” like this whom are convinced that the moon is fake? All evidence to the contrary is just interpreted as more evidence of fakery. I wish that guy would do a post on Mr. Schiff.
Because it would be the end of the world if the United States very tight labor markets and 3% inflation.
Oops! In the first graph above, you misspelled “Accumulated”
O/T: Marcus, in broad terms, what do you think are macro’s biggest problems? What’s most wrong with the institution of the study of macro as it stands today?
Tom, that´s a long essay type of question. The attached link is illustrative of one important problem: Monetary Policy remains “mysterious”!
Marcus, thanks. Are you saying the author of that piece is confused?
Tom, he´s not only “confused” but has no idea what MP is all about!