Fed Decision a Win for Liberal Economics

By Jonathan Bernstein, Washington Post - December 13, 2012

In the “elections have consequences” department, add today’s announcement by the Federal Reserve that it will not only tolerate somewhat more inflation, but will do so until unemployment drops below 6.5 percent. It’s a decision that pushes the Fed more and more in the direction of liberal economists who have supported monetary policy designed to encourage economic growth, not fight inflation. (See Mark Thoma’s explanation of the new policy.)

Or, to put it another way, it’s a sign that the current Fed board is increasingly taking the “dual” part of its dual mandate — to seek stable prices and full employment — a lot more seriously than it seemed to earlier in Barack Obama’s presidency.

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