In an unusual gesture, Richmond Fed Pres Lacker is giving an official statement laying out why he dissented to the FOMC decision to extend OT. “I dissented on this decision because I do not believe that further monetary stimulus would make a substantial difference for economic growth and employment without increasing inflation by more than would be desirable.” In other words, in terms of helping the economy, the only bullets the Fed has left are blanks and the risks of current policy far outweigh their perceived and econometrically modeled benefits. He did though say monetary stimulus may be appropriate to fight the Fed’s boogeyman of deflation if it were to emerge. While the Fed looks at deflation as a black or white issue, good or bad, it’s not. Deflation is bad for debtors but good for creditors and savers.
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