The Corner

The Fed Adrift

My Bloomberg View column this week pushes back against the Fed’s stated reasons for rejecting NGDP targeting:

The principal reason the central bankers gave was that “switching to a new policy framework could heighten uncertainty about future monetary policy.” As Scott Sumner, an economics professor at Bentley University, points out, that fear would be reasonable if anyone knew what the current “policy framework” was. The Fed doesn’t follow a strict inflation target as it stands. If there is some other rule it follows, it hasn’t shared it with the rest of us. Its conduct of monetary policy over the past few years has been ad hoc.

I also note that while NGDP targeting may sound like a novel and unfamiliar idea, we do have some experience with it–and it worked pretty well.

Ramesh Ponnuru is a senior editor for National Review, a columnist for Bloomberg Opinion, a visiting fellow at the American Enterprise Institute, and a senior fellow at the National Review Institute.


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