The Corner

Economy & Business

What the Fed ‘Desires’

Neil Irwin’s very first words in this column—“Inflation has stubbornly stayed lower than the Federal Reserve has desired for the past eight years”—are, I think, basically wrong.

Leave aside whether the Fed should want inflation to rise to 2 percent a year, which is its stated goal. Reaching that goal manifestly hasn’t been its top priority. It raised interest rates the very day Irwin’s column came out, and the column noted that it was the fourth time it has raised them in the last two years. This is not the behavior of a central bank that wants more inflation.

Irwin also writes that we’re in “an era in which the Fed proved impotent to get inflation up to the 2 percent level it aims for,” and the latest rate hike may have “prolonged” that era. But when the Fed takes a step that practically everyone involved understands to be disinflationary, it can’t be evidence of its inability to boost inflation. It’s evidence of its lack of interest in boosting inflation. If it wants higher inflation at all, it doesn’t want it very urgently.

At Bloomberg View today, I have an article about inflation and the business cycle. My argument: The fact that inflation typically rises during economic expansions and falls during recessions is a sign of subpar monetary policy.

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.