In my column yesterday I argued that because inflation isn’t a problem and the labor market is, the Fed needs to proceed with patience in its return to “normal” monetary policy.

The fundamental logic of monetary policy is the same as it’s been for years now: Prices aren’t rising as rapidly as the Fed would like them to, and the labor market isn’t using workers to their fullest extent. The Fed is still missing on both sides of its “dual mandate.”
Prudence thus dictates a patient return to normal monetary policy. And the unemployment rate falling below 6 percent shouldn’t fundamentally change anything.

You can read my column here.

I just read a speech given yesterday by an executive vice president of the Federal Reserve Bank of New York, who oversees domestic “open market operations,” among other things. In other words, he’ll be the guy who will operationalize a good chunk of the Fed’s return to normalcy. (Full disclosure: he’s my old boss.)

His speech reviews the Fed’s recent statement on normalization principles and plans, and focuses on how the Fed will control interest rates during normalization. If you’re interested in the details of how the Fed will gradually pull back from the extraordinary measures it has taken to combat the Great Recession, this speech is a great place to start.

— Michael R. Strain is a resident scholar and economist at the American Enterprise Institute. You can write to him on Twitter at twitter.com/MichaelRStrain.