Like deer caught in headlights

At least Evans dissented from this embarrassing statement:

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee continues to expect a moderate pace of economic growth over coming quarters and consequently anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee’s dual mandate. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.

We expect to fail, but we’ll keep a close watch on things just to make sure.



16 Responses to “Like deer caught in headlights”

  1. Gravatar of Brian Brian
    13. December 2011 at 12:21


  2. Gravatar of marcus nunes marcus nunes
    13. December 2011 at 12:59

    That´s maybe why they´ve started on his “obituary”!

  3. Gravatar of Catherine Catherine
    13. December 2011 at 13:06

    Time for a Charles L. Evans bumper sticker.

  4. Gravatar of Jason Odegaard Jason Odegaard
    13. December 2011 at 13:25

    Is Evans still going to be a voting member next year? I’m worried the Fed will get even less pro-AD.

    I’m surprised Yellen did not vote along with Evans.

  5. Gravatar of Scott N Scott N
    13. December 2011 at 13:37

    Jason, most of the board of governors, yellen included, are Bernanke lackeys. They will support Bernanke no matter what he wants to do. The regional presidents, not so much. They seem more willing to openly disagree with Bernanke.

    Also, the Fed will get more pro-intervertionist next year since hawks like Kocherlakota and Fisher will be replaced with doves. If I recall correctly, only one member of next year’s FOMC is mildly hawkish and the rest are very dovish.

  6. Gravatar of flow5 flow5
    13. December 2011 at 14:02

    “The Committee continues to expect a moderate pace of economic growth over coming quarters”

    And these are our high priests in economics? Monetary flows have definitive lags. The committee is dead wrong. Real-output falls sharply in both May & June of 2012.

  7. Gravatar of Silas Barta Silas Barta
    13. December 2011 at 14:17

    Low inflation is failure? I thought inflation was the means, not the end. Isn’t it possible for there to be success in reducing unemployment while keeping inflation low?

    Like, say, a bunch of people suddenly get a bolt of insight and figure out profitable business plans that involve hiring the unemployed?

  8. Gravatar of John John
    13. December 2011 at 14:23

    At least they’re hitting one part of their dual mandate. If inflation doesn’t settle where they want they’ll be failing at everything.

    I think it’s worth pointing out what Scott wrote about a week ago; we don’t know what the new natural rate of unemployment is with 99 week unemployment insurance. If it was around 5% during the middle of the housing boom and with 20 something week UI, it may be around 8% with 99 week UI.

    On the unemployment front, I think the economists should be looking for workforce participation to pick up rather than falling unemployment numbers. The falling unemployment numbers were very deceiving last month as they masked falling participation and an uptick in temporary retail jobs.

  9. Gravatar of Benjamin Cole Benjamin Cole
    13. December 2011 at 15:01

    You know, if a recovering alcoholic still drinks, is it really a failure? After all, he is still considering not drinking. And watching his drinking very closely, to see if it gets any worse.

    Inflation is below a dubious 2 percent goal, and people are leaving the workforce in droves (the worker-to-population level is still down five percent from 2007) and the Fed plans to stand by? What kind of signal does this send to the market?

    Ford to NY: Drop Dead.

    Fed to USA Economy: Drop Dead Again

  10. Gravatar of W. Peden W. Peden
    13. December 2011 at 17:11


    That’s a good point on the natural rate of unemployment. It’s a reminder that the Fed’s dual mandate is mind-numbingly stupid under any reasonable epistemological assumptions e.g. that natural rates of unemployment are not stable or predictable.

  11. Gravatar of Passing By Passing By
    14. December 2011 at 01:24

    This makes clear the Committee’s contempt for the “dual mandate”. Does anybody imagine that they would issue such a pathetic declaration of inactivity if inflation ran 4% above target for three years while unemployment was below target?

  12. Gravatar of ssumner ssumner
    14. December 2011 at 19:20

    Marcus, thanks for the link.

    Jason, They’ll be more dovish next year.

    John, They aren’t even hitting their inflation target. It’s been 1.2% since Lehman failed, and it’s expected to be about 1.5% over the next 5 years (Cleveland fed forecast.) So they are below their target for both jobs and inflation. But they don’t care.

    Passing by, Very good point.

  13. Gravatar of John John
    14. December 2011 at 19:44


    What’s so bad about 1.5% inflation. If prices only rise 1.5% every year, does that stop the economy from working somehow? I completely understand that a period of higher inflation would cause a temporary boost in output, but Friedman understood that it would come at a greater cost and you should too.

  14. Gravatar of Claudia Sahm Claudia Sahm
    16. December 2011 at 06:46

    too bad you didn’t title the post “reindeers” … then at least you would have spread some holiday cheer 🙂

  15. Gravatar of ssumner ssumner
    16. December 2011 at 12:01

    John, I’ve told you many times I don’t care about inflation, so there’s nothing wrong with 1.5% inflation if NGDP is on target. But the Fed does have dual mandate, so they seem to think 2% inflation is good. I’m just pointing out that money is too tight by either Fed criteria.

    Now if you want to talk about NGDP targeting, which I favor, then we can have that conversation.

    Claudia, I’m not feeling in the holiday mood.

  16. Gravatar of Things no one has asked me to do: adjudicate the dispute on the existence of the fiscal multiplier (in plain English) « Shewing the fly Things no one has asked me to do: adjudicate the dispute on the existence of the fiscal multiplier (in plain English) « Shewing the fly
    22. December 2011 at 14:48

    […] yes it has. As Sumner himself has pointed out, the Fed is currently acting irrationally – quoting him quoting the Fed minutes last week, [Fed] “Consistent with its statutory mandate, the Committee seeks to foster maximum […]

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