That´s the “Shadow Open Market Committee”. The title of his talk: Three Challenges to Central Bank Orthodoxy. His opening:
The current monetary policy debate in the U.S. is at a crossroads. Since 2007-2009, the Federal Open Market Committee (FOMC) has pursued a very aggressive monetary policy strategy. This strategy has been associated with a significantly improved labor market, moderate growth, and inflation relatively close to target, net of a large oil price shock. A key question now is how to think about monetary policy going forward.
In this address, I have outlined an interpretation of current events in U.S. monetary policy that I called the orthodox view. This view stresses the currently stark difference between FOMC objectives, which are arguably nearly attained, and FOMC policy tools, which remain on emergency settings. A simple and prudent approach to current policy would be to begin normalizing the policy settings in an effort to extend the length of the expansion and to avoid taking unnecessary risks associated with exceptionally low rates and a large Fed balance sheet. This would be done with the understanding that policy would remain extremely accommodative for several years, even as normalization proceeds, and that this accommodation would help to mitigate remaining risks to the economy during the transition.
What Bullard and many others call “very aggressive” monetary policy just reflects the mistaken view that monetary policy (MP) is synonymous with interest rate policy (IRP). The same large group also likes to appeal to unspecified “risks” that supposedly flow from “excessively” low rates so that “prudent” policy would be to begin to “normalize policy” (another reference to MP=IRP). As Jeremy Stein famously said halfway through his short tenure at the Board, “interest rates get into all of the cracks”. Anyway, the FOMC objectives are nearly attained!