Missed inflation and employment targets damage the Fed's credibility, Ford School economists tell The Washington Post
Wednesday, August 15, 2012
With the consumer price index at just 0.1 percent in July – well short of the Federal Reserve's 2-percent target – economists Betsey Stevenson and Justin Wolfers contend the Fed should act vigorously when it meets again in September, according to The Washington Post.
According to the author: "Some economists — such as Betsey Stevenson of the University of Michigan and Justin Wolfers of the University of Pennsylvania — have argued that the Fed, by continuing to undershoot its own inflation and employment targets, is undermining its credibility while failing to spur an adequate recovery from the recession.
They argue that a bout of inflation could help the economy, at least in the short term. The idea is that inflation makes cash worth less, which spurs consumers and businesses to spend it now before it loses more value. That process could lead to more hiring and growth."
Stevenson will join the Ford School as an associate professor of public policy on September 1. Wolfers, who will split his appointment between the Ford School and the University's Department of Economics, begins on January 1, 2013.