Monday, June 13, 2016

Krugman: Fed June Rate Hike Still in Play

Paul Krugman writes at NYT:
I’m hearing some buzz that the Fed may still be considering a rate hike at its upcoming meeting, or if not then soon.

The Federal Reserve Open Market Committee,  the Federal Reserve's monetary policy-setting committee, meets this week on Tuesday and Wednesday with a policy statement scheduled to be released on Wednesday at 2:00 PM ET.

Of course, Krugman, like Austrian-lites, thinks the economy is in just terrible shape:
 It’s true that measured unemployment is low by historical standards. But that’s a number depressed by low labor force participation; nobody really knows how far we are from full employment. Meanwhile, wage increases have risen but are still nowhere near worrying inflationary levels; actual inflation is below 2 percent, and both inflation expectations from surveys and implied market inflation predictions are low and falling.

Krugman is making a series of errors here, which I have addressed in the EPJ Daily Alert.

In the ALERT, I have written that we may already be at "full employment" and explain why.

And I have also discussed in the ALERT why thinking that price inflation can't jump quickly and dramatically (first to 3%, then 5%) is a trend following error that doesn't take into account the true drivers of accelerating price inflation.


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