Here’s the Financial Times:
Three weeks ago, Sanna Marin, Finland’s prime minister, retweeted a link to an article by a Finnish academic together with the following quote: “There is something seriously wrong with the prevailing ideas of monetary policy when central banks protect their credibility by driving economies into recession.”
Defenders of those prevailing ideas predictably pushed back, warning against second-guessing independent central banks or not valuing their credibility. But defensiveness is the wrong response. Not just because Marin didn’t actually criticise any central bank actions. But, more profoundly, because avoiding a debate over whether our macroeconomic regime is fit for purpose is more perilous than having one. . . .
Like in the 1980s, in time bright economists will suggest better ways of designing monetary policy against energy price shocks.
Wouldn’t it be nice if there was some sort of alternative to inflation targeting, which was able to account for energy price shocks.
Got any ideas?
PS. This sentence had me scratching my head:
In 2020 and 2021, the Federal Reserve and the European Central Bank vowed to tolerate a period of higher inflation if employment had further to rise or there would be little room to loosen policy in case of a downturn. But this new attitude fell at the first hurdle.
Umm, where to begin . . .