In a presentation today, St. Louis Federal Reserve Bank President James Bullard that further monetary actions by the Fed’s FOMC had been placed on “pause” as a result of the modest gains in the US economy and the already “ultra-easy” policy that is in place. Bullard sums up his position this way:
[T]he main risk lies in potentially overcommitting to the ultra-easy monetary policy, reigniting the global inflation debacle of the 1970s.
Bullard includes a chart in his presentation that shows personal consumption expenditures running slightly above an annual inflation rate of 2%, the Fed’s sort-of target.
Harking back to the bad, old days of the 1970s, Bullard notes that the era suffered 4 recessions in 13 years, double-digit inflation, and double-digit unemployment. Calling monetary policy a “blunt instrument,” Bullard argues that labor policy should replace monetary policy in grappling with unemployment.
That’s probably a wise suggestion, except that labor policy depends on getting legislation through the Congress, and if that had been easy, it would already have been done. Even though Fed monetary policy may be a club and not a scalpel, it may be all that’s left in the policy arsenal.
Bullard’s slide presentation is available here.