Dollars and Jens
Sunday, May 24, 2009
An interview with Dallas Fed President Richard Fisher. I personally think of Lacker as the most hawkish member of the FOMC, but that may be incorrect, and I may overly conflate Fisher and his predecessor McTeer, who was no fan of inflation but has a little bit of Greenspan's appreciation of the power of higher productivity growth to alleviate inflationary pressures.
By "trim mean calculation", I have no doubt they mean the trimmed-mean PCE inflation rate calculation, which seems odd in the context of suggesting it would lead one to be a "deflation hawk", as even the normal (ex-food-and-energy) core reading of PCE inflation has been substantially lower than the trimmed-mean rate, which is the rate that has led me not to be terribly concerned (yet) with deflation.
I've assumed the Fed wanted to create inflationary expectations so as to lower the real interest rate, and was musing recently as to whether the Fed could have done everything else as it has but simply changed all references to "purchasing treasury securities" to "monetizing the federal debt", and whether that would have created the requisite inflationary expectations. I have also thought recently — though without making the connection; I was thinking in terms of a deliberate policy of devaluation of the dollar against other currencies — that the status of the dollar as a global reserve currency imbues some of our economic policy decisions with more tricky foreign policy repercussions. Perhaps the political independence of the Fed about which we need to be concerned is not simply the threat from domestic political interference but also from foreign pressure.