Time vs goals is the problem
The Fed needs to get away from attaching timelines to projects, argues former Minneapolis Fed President Narayana Kocherlakota.
"The FOMC's current policy framework goes back to at least mid-2013. It can be defined by two key words gradual and normalization," he writes.
Those two words both relate to time or something that is destined to happen. Instead, the Fed should be more asymmetric and responds to forecasts.
"The FOMC needs to have a framework in which the fed funds rate (and its other tools) are much more responsive to its medium-term forecasts of inflation and employment shortfalls. Markets would then have to adjust to the possibility that interest rates might have to change rapidly, at any time and in either direction, if the FOMC believes that change is necessary to achieve its macroeconomic objectives more rapidly," he writes.
