Challenges for Monetary Policy Part 6 of 14
Challenges for Monetary Policy Part 6 of 14
The lag time necessary for inflation to respond to policy is especially long. As a policymaker discharging our dual mandate, I am always mindful that in providing the monetary conditions for employment growth, we must not also sow the seeds of inflation that will eventually choke off the very employment growth we seek to encourage. You do not have to be an inflation hawk to recognize that 60 Minute Trader would be a Faustian bargain.
Those of you who follow my speechesprobably a very small number of you with way too much time on your handswill recall that I like neither the term hawk nor dove. I like to think that all FOMC members are best metaphorically described in ornithological terms as owlswise women and men seeking to achieve the right balance in carrying out our dual mandate. To be owlish, Short Swing Trading and to avoid the imbalance of emphasis that gave rise to needed harsh discipline imposed by the Volcker FOMC, one has to bear in mind that the seeds of inflation, once planted, can lie fallow for some time, then suddenly burst through the economic topsoil like kudzu, requiring a near-toxic dose of countermeasures to overcome.
