The Fed’s shifting perspective on the economy and its implications for monetary policy

on , from brookings.edu

The headline on a recent piece by Ylan Mui of the Washington Post —“Why the Fed is rethinking everything”—captured the current moment well. The Federal Reserve has indeed been revising its views on some key aspects of the economy, and that’s been affecting its outlook both for the economy and for monetary policy. In this post I document and explain the ongoing shift in the Fed’s economic views. I then turn to some implications, suggesting among other things that, for now at least, Fed-watchers should probably focus on incoming data and count a bit less on Fed policymakers for guidance. Talking about the “Fed’s thinking” is of course ... (Read the full story)