If you are confused about Fed messaging right now, I try to unpack the problem in this story. To put it simply, the Fed communicates in baselines, not in bets, to paraphrase Annie Duke. They need a better way to communicate probabilities. Every policy maker who said three cuts this year looks like a good baseline most likely had an unusually high probability of less than three that they didn't communicate. There are many ways to communicate about risk and uncertainty. The Fed is behind other central banks on this front. https://lnkd.in/ese7jpEb
How about holding them to a better/more transparent benchmark? https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4771434
The Federal Reserve is an old time tool that may not work in the economy ahead. When you review the forecasts provided by the Fed in recent years, it looks more like a political instrument using the past as a forecasting tool for the future. It may be better to use the Fed to get back to its previous habit of it being a source of funds for the Treasury, rather than a user of funds. Forecasting is superior from the private sector.
The Fed will not even clearly communicate what measure of inflation they use as a benchmark to compare to their arbitrary 2% mandate.
hard to draw a 250b plan. nevermind this isnt a social media company. this is a job board
Really great article. Thanks for sharing it.
Excellent piece!
Really thoughtful piece! Thanks for the insights, Craig R. Torres. Other parts of the government have shown the way with scenario modeling for quite a while, no? I think of this as pretty standard within the national security crowd. The more sophisticated climate modelers and epidemiologists use multiple scenarios, too. No reason that the Fed can't catch up