Patrick Horan and David Beckworth on *The Fate of FAIT* and the Future of the Fed’s Monetary Framework
Macro Musings with David Beckworth
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Is the New Framework Less Forward-Looking?
The Fed used to respond to expected future inflation. But the new framework no longer includes a forward-looking reaction function. Instead, they actually wait to see what happens with inflation before responding. And then once inflation got really high, they actually reverted back to expected inflation. I think it just wants to see, well, we can forecast into the future that inflation is going to start to fall so we can ease up on the hikes right now. This is a question with fate or with any other framework really.
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