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Assessing the Powell policy review

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  • Robert Hetzel

Abstract

To understand both how it controls inflation and how it trades off inflation with its goal of maximum employment, the Federal Reserve System uses a Keynesian framework in which monetary policy moves the unemployment rate relative to a presumed full employment value, termed the NAIRU (non‐accelerating inflation rate of unemployment). Because it does not know the value of the NAIRU, it pursues an expansionary monetary policy until inflation rises. This policy risks reviving the inflationary monetary policy of the 1970s.

Suggested Citation

  • Robert Hetzel, 2021. "Assessing the Powell policy review," Economic Affairs, Wiley Blackwell, vol. 41(1), pages 51-58, February.
    • Handle: RePEc:bla:ecaffa:v:41:y:2021:i:1:p:51-58
    DOI: 10.1111/ecaf.12442
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    References listed on IDEAS

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    6. John C. Williams, 2017. "Preparing for the Next Storm: Reassessing Frameworks & Strategies in a Low R-Star World," Speech 176, Federal Reserve Bank of San Francisco.
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    9. John C. Williams, 2017. "Preparing for the Next Storm: Reassessing Frameworks and Strategies in a Low R-star World," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
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