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Econ 2: Spring 2014: UC Berkeley: Wednesday April 23, 2014 Office Hours Today POSTPONED to 1-3 PM Because of (a) Oral Exams and (b) Piketty Day...

Wednesday Focus: Federal Reserve "Forward Guidance": April 23, 2014

Over at the Washington Center for Equitable Growth:

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@Steen_Jakobsen:

Fed - Realise we have been looking for higher rates in 2 yrs time every year since 2008! READ MOAR

It does all hinge on how rapidly our cyclical unemployment is turning into structural unemployment. If it is--if those out the labor force are never coming back and will never downward pressure on the inflation rate--then this time is in different, and we are likely to see the Federal Reserve raising short-term safe interest rates to 2% per year by early in 2017. More likely given everything we have seen, however, is that come 2015 inflation is still showing no significant signs of persistently breaching 2% per year, and so there will be no excuse for raising short-term safe interest rates. Thus this pattern of always expecting higher interest rates in two years will continue.

You would think that at some point the Federal Reserve would start seriously thinking about me for a Volcker or Roosevelt-like regime change. But no...

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