Screwed-up minds at the Fed

San Francisco Fed president John Williams on August 15:

Central banks and governments around the world must be able to adapt policy to changing economic circumstances. The time has come to critically reassess prevailing policy frameworks and consider adjustments to handle new challenges, specifically those related to a low natural real rate of interest. While price level or nominal GDP targeting by monetary authorities are options, fiscal and other policies must also take on some of the burden to help sustain economic growth and stability.

Then the same individual three days later:

Federal Reserve Bank of San Francisco President John Williams said the U.S. economy is strong enough to warrant an increase in interest rates soon, warning that waiting too long risks high inflation or asset bubbles that would cripple growth.

“In the context of a strong domestic economy with good momentum, it makes sense to get back to a pace of gradual rate increases, preferably sooner rather than later,” Williams said Thursday in the text of a speech in Anchorage, Alaska. “An earlier start to raising rates would allow a smoother, more gradual process of normalization.”

First he talks about “adapting” the policy framework. Then, he says the framework of “policy (rate) normalization” is still “the way to go”!

To this tweet:

Jeanna SmialekVerified account‏@jeannasmialek

Williams is still gunning for a rate hike, despite his essay earlier this week urging a re-think in the longer term.

David Beckworth answered:

David Beckworth ‏@DavidBeckworth 

Very clever. Gun for a rate hike now=>cause economic stress=>blame current system=>get monetary policy reform now.

No wonder the economy is a mess.

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