Summary of What the Federal Reserve Got Totally Wrong about Inflation and Interest Rate Policy

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What the Federal Reserve Got Totally Wrong about Inflation and Interest Rate Policy summary
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The Federal Reserve increased its target Fed Funds rate four times in 2018, and  the last move in December sent equity markets into a tailspin, with a massive loss of financial value. In 2019, Fed officials have signaled a hands-off approach to further rate hikes. Economist Daniel Alpert analyzes Fed policy on interest rates, with a keen eye focused on housing and rental prices and their effect on overall inflation. Business leaders and policy experts interested in a deep-dive examination of inflation and Fed machinations will appreciate this authoritative report.

About the Author

Daniel Alpert is a professor at Cornell Law School and founding managing partner of Westwood Capital LLC.

 

Summary

For an example of making policy with blinders on, look no further than the Federal Reserve’s 2018 interest rate hikes: The increases came even as the global economy stalled and US growth numbers sputtered. In the first quarter of 2019, the Fed reversed course and indicated that further rate movements would depend more on data than on dogma. The Fed’s policy actions seem to highlight a pattern of experts misintepreting economic information and generating forecasts unaligned with economic fundamentals. Most notable is an inconsistent understanding of housing...


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