In the aftermath of Tuesday's FOMC decision, I've been putting together a list of appropriate links for the classroom.
For a sound discussion of the decision, I would recommend William Polley's blog. He's a good Fed-watcher, and seems to have a balanced view.
Although written prior to the decision, Aplia has a good discussion for the classroom, as well as some discussion questions.
As for my view? I'm afraid my opinion can be deduced from the title of this site, and my interest in the works of Milton Friedman. While the Fed has a dual mandate, I believe its best option is focus on inflation. And I think that explains the tilt in the last part of the statement, "However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully. Developments in financial markets since the Committee’s last regular meeting have increased the uncertainty surrounding the economic outlook. The Committee will continue to assess the effects of these and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth." That sounds to me like they intend to watch the price data closely for the foreseeable future, and remain ready to act.
What's your take? What do your students think? I look forward to your comments.
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The FOMC statement tells the story.
I have the students read the statement first before reading the headlines and commentary. We take the statement apart in class and compare it to the previous statement looking for changes. Bernanke has always been clear and in my mind, always says what he means. Yet oh the differences in interpretation by the pundits! Greg Ip at WSJ and John Barry at Bloomberg are good sources for clarification if needed. Thank you for the additional sources and references on monetary policy. PBS did a good segment on the Fed earlier this week--educating and explaining the role of the Fed and the effect of interest rate changes. I have been watching all commentary since Tuesday to see if anyone would mention a "neutral fed funds rate"; one that neither stimulates or contracts an economy. Several years ago it was a topic of discussion--then 4.75% was thought to be about the neutral fed funds rate. I too believe the Bernanke Fed will watch the incoming data and not allow inflation to rise above their comfort zone. Studying monetary policy is never dismal.
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