The Fed is rethinking one thing too many

OFFICIALS at the Federal Reserve, a few of them anyway, seem to be rethinking their views of the economy in some dramatic ways. In a new blog post, however, Ben Bernanke suggests that Fed watchers shouldn’t overstate the radicalism of the intellectual evolution within the Fed. Top policy-makers still have confidence in their mental model of the economy; they have just been tweaking a few of the parameters within that model, he says. In particular, the Fed’s long-run projections for GDP growth, the unemployment rate and their benchmark interest rate have all been revised down (see table).

As Mr Bernanke notes, these revisions change the outlook for rate rises in slightly different ways….Continue reading

This post was originally published in the Economist.

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The Fed is rethinking one thing too many

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