Businessweek: Five Ways the Fed’s Deflation Playbook Could Be Improved



I have a new column out in Businessweek, just in time for the Federal Reserve meeting in Jackson Hole. It is a congratulatory open letter to Federal Reserve Chairman Jerome Powell and the rest of the Fed on beating inflation:

Dear Jay,

Mazel tov! You beat inflation and avoided a recession. Revel in the sweet taste of victory as you fly-fish with other central bankers at the annual symposium in Jackson Hole, Wyoming. With inflation at 3.2%, unemployment at 3.5% and gross domestic product expected to top 3% in the third quarter, you’ve earned a vacation. Hell, take the rest of the year off!

Okay, a little more snarky than typical Fed communications. But it’s a serious piece, addressing the real missteps that the US Central Bank made along the way to bringing the post-pandemic, fiscally induced price surges under control.

In particular, I address five issues, all of which should be familiar to this site’s readers:

1. Every Inflation Era Is Different
2. Lose the 2% Inflation Target
3. FOMC is Always Late!
4. Inflation Expectations Surveys Are Useless
5. Update Your Models and Mental Framework.

I do hope the Fed Chief takes it in the spirit it was intended: “Good job, but could be better!



Five Ways the Fed’s Deflation Playbook Could Be Improved
By Barry Ritholtz
Businessweek, August 18, 2023


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