Peter Ireland on the Fed’s Pandemic Performance and the Path Forward for Monetary Policy
Macro Musings with David Beckworth
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The Fed Reserve Raises the Funds Rate by 50 Basis Points?
Expectations matter. By manipulating real interest rates, that's how we influence the time path of spending. And then, working through a filips curve, you know, by changing the rate of resource salutation, we can steer the rate of inflation. The fed reserve raises the funds rate by 50 basis points later this week and it probably will have some significant effects on unspending and an inflation and economic outcomes. But there are two big take away points, in my view, from the necansian approach, beyond the cansian approach. One of them has been fully internalized. That is the idea that expectations matter.
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