Jackson Hole Paper Backs View of Fed Liftoff ‘Sooner,’ Not Later
2015-08-29 14:00:00.0 GMT
By Vivien Lou Chen
(Bloomberg) -- U.S. is “nearing” point at which
diminishing slack will lead to upward pressure on inflation,
according to paper presented at Fed’s Jackson Hole symposium
that seems to support rate liftoff “sooner rather than later.”
* “We can be confident based on our slack measures that
inflation will soon be rising,” economists Jon Faust of
Johns Hopkins University and Eric Leeper from Indiana
University wrote in paper
* “Confident” that slack is diminishing; “at some
point,” it will put upward pressure on inflation
* Authors sketch “variations on view that might support
liftoff sooner rather than later”
* Also focus on “new normal” in policy making, conclude
“disparate confounding dynamics” are more important
than normal cyclical dynamics that currently dominate
policy analyses
* Fed policy “could easily devolve into regular goalpost
moving” without clearer framework for applying a new
approach into deliberations
* There’s “very real risk” of “seat-of-the-pants”
policy making as officials “use judgment,” “take a
stand on things that basic research has not yet
incorporated into a well-established analytic
framework”
* “Best solution” is for researchers to integrate
“disparate confounding dynamics” that dominate practice of
central bank into standard models
* Until this happens, policy makers “must take a stand”
on what these dynamics mean for policy
* 3 examples of dynamics that should grow more important to
policy makers in coming decades are labor’s share of income,
demographics and fiscal policy
* NOTE: Fed’s Jackson Hole symposium in Wyo. is hosted by KC
Fed; Fed Vice Chair Stanley Fischer is scheduled to speak
later on Saturday
For Related News and Information:
First Word scrolling panel: FIRST<GO>
First Word newswire: NH BFW<GO>
To contact the reporter on this story:
Vivien Lou Chen in San Francisco at +1-415-617-7078 or
vchen1@bloomberg.net
To contact the editors responsible for this story:
James Holloway at +1-212-617-4454 or
jholloway8@bloomberg.net
Greg Chang, Vivien Lou Chen
2015-08-29 14:00:00.0 GMT
By Vivien Lou Chen
(Bloomberg) -- U.S. is “nearing” point at which
diminishing slack will lead to upward pressure on inflation,
according to paper presented at Fed’s Jackson Hole symposium
that seems to support rate liftoff “sooner rather than later.”
* “We can be confident based on our slack measures that
inflation will soon be rising,” economists Jon Faust of
Johns Hopkins University and Eric Leeper from Indiana
University wrote in paper
* “Confident” that slack is diminishing; “at some
point,” it will put upward pressure on inflation
* Authors sketch “variations on view that might support
liftoff sooner rather than later”
* Also focus on “new normal” in policy making, conclude
“disparate confounding dynamics” are more important
than normal cyclical dynamics that currently dominate
policy analyses
* Fed policy “could easily devolve into regular goalpost
moving” without clearer framework for applying a new
approach into deliberations
* There’s “very real risk” of “seat-of-the-pants”
policy making as officials “use judgment,” “take a
stand on things that basic research has not yet
incorporated into a well-established analytic
framework”
* “Best solution” is for researchers to integrate
“disparate confounding dynamics” that dominate practice of
central bank into standard models
* Until this happens, policy makers “must take a stand”
on what these dynamics mean for policy
* 3 examples of dynamics that should grow more important to
policy makers in coming decades are labor’s share of income,
demographics and fiscal policy
* NOTE: Fed’s Jackson Hole symposium in Wyo. is hosted by KC
Fed; Fed Vice Chair Stanley Fischer is scheduled to speak
later on Saturday
For Related News and Information:
First Word scrolling panel: FIRST<GO>
First Word newswire: NH BFW<GO>
To contact the reporter on this story:
Vivien Lou Chen in San Francisco at +1-415-617-7078 or
vchen1@bloomberg.net
To contact the editors responsible for this story:
James Holloway at +1-212-617-4454 or
jholloway8@bloomberg.net
Greg Chang, Vivien Lou Chen