The Federal Reserve's announcement last December that it was switching from a time- to a state-based policy rule has not REPEAT NOT raised expectations of inflation over the next five, ten, or thirty years. Perhaps this is because Federal Reserve communicators have spent a lot of time telling people that the shift does not mean that the Federal Reserve will tolerate higher inflation. Perhaps it is for other reasons.
This is a powerful empirical piece of evidence that it is much harder to summon the Inflation Expectations Imp than economists like Greg Mankiw had thought. It is a point for the expansionary fiscalists in their debate with the expansionary monetarists.
And it is a smackdown of me for my fit of enthusiastic expansionary monetarism last December, when I wrote: Brad DeLong: The Federal Reserve's Shift from a Time- to a State-Based Policy Rule: Will It End Our "Lost Decade"?.
Here's what I wrote last December: