Quote of the Day: Federal Reserve Finally Starts to Get Serious

For indispensable reporting on the coronavirus crisis, the election, and more, subscribe to the Mother Jones Daily newsletter.


From the Federal Reserve, announcing a bigger, bolder bid to use the expectations channel to manage monetary policy:

In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored.

This is a considerable surprise. Instead of merely confirming that they’re still committed to their previously announced quantitative easing program (QE3) and that low interest rates are “likely to be warranted” through 2015, the Fed has gone much further. They’ve now announced specific goals: interest rates will stay low at least until unemployment gets below 6.5 percent, and they’re willing to tolerate inflation of 2.5 percent along the way.

This may seem like small potatoes. Unemployment will probably drop below 6.5 percent by 2015 anyway, and inflation of 2.5 percent is only slightly above the current target.  But in this case, it really is the thought that counts. A specific employment target is brand new, and a willingness to tolerate higher inflation at all is brand new.

This is big news. I expect conservative outrage (“debasing the currency,” “hyperinflation right around the corner,” etc.) to be in full swing by the time I manage to hit the Publish button on this post.

POSTSCRIPT: And why the change? Because the Fed believes the economy continues to show a lot of weakness. “The Committee remains concerned that, without sufficient policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that inflation over the medium term likely would run at or below its 2 percent objective.”

DEMOCRACY DOES NOT EXIST...

without free and fair elections, a vigorous free press, and engaged citizens to reclaim power from those who abuse it.

In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily bluster—Mother Jones' journalism is driven by one simple question: Will America move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

DEMOCRACY DOES NOT EXIST...

without free and fair elections, a vigorous free press, and engaged citizens to reclaim power from those who abuse it.

In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily bluster—Mother Jones' journalism is driven by one simple question: Will America move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate