A Note on Contemporary Macroeconomic Policies: The Fed's Emerging Culture of Dovishness

摘要

Is the Federal Reserve too easy? This economist thinks a "dovish" stance has been institutionalized at the Fed. Challenge publishes many pieces to the contrary, but we believe it is important to present this view as well. Economist David Jones is a longtime Fed watcher. Perhaps it should be expected that a culture of dovishness would emerge at our Federal Reserve, given its prolonged period of increasingly accommodative monetary policy actions. Back in December 2008, the monetary authorities, in the face of the worst credit crisis since the Great Depression, reduced their conventional target for the nominal federal funds rate in several steps to a rock-bottom level of 0 to 0.25 percent (from 5.25 percent in September 2007) and, with the credit crisis continuing to worsen, were forced to turn to the unconventional use of the Fed's balance sheet as a policy instrument and to engage in large-scale purchases of assets (quantitative easing) with the aim of depressing long-term interest rates and exerting upward pressure on prices of stocks, homes, and other financial assets.