Most economists who are critical of the Federal Reserve’s easing policy say it has gone too far. But Christina Romer, former chairwoman of President Obama’s Council of Economic Advisers, thinks the Fed hasn’t gone far enough.
“A more definitive policy shift — like adopting a new target for monetary policy — would likely have a greater impact on expectations and in stimulating the recovery,” she writes in The New York Times.
Romer doesn’t like what she sees as implications of the Fed’s plan to keep interest rates near zero at least until unemployment drops to 6.5 percent.
Editor's Note: This Wasn’t an Accident — Experts Testify on Financial Meltdown
That’s because Romer, now an economist at the University of California, Berkeley, thinks the plan implies a rush to raise interest rates once the jobless rate hits that level.
“The new policy’s numerical parameters are too conservative,” she says.
“The most pressing problem, though, is that the Fed’s commitment to its new policies appears shaky.”
Soon after the Fed announced its latest easing steps in December, several central bank officials said some of the steps could be lessened or ended this year.
Paul Moreno, a history professor at Hillsdale College, offers the more typical criticism of the Fed.
“[W]ith the central bank having increased the money supply by 25 percent since the financial crash of 2008 — while the federal government has borrowed $5 trillion — can inflation be far off?” he writes in The Wall Street Journal.
Editor's Note: This Wasn’t an Accident — Experts Testify on Financial Meltdown
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