Quote:
Originally Posted by Slava
This is just hindsight bias. When he made those comments there were not all of the supply-chain issues we've seen over the past year. And frankly, it's hard to argue that the war in Ukraine hasn't caused a lot more of a spike in inflation than could've been expected.
But still...what would you have them do here? Just stick to the 0.25% and be able to tell everyone that they said they'd keep rates low, so they were doing that? It's preposterous.
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No, like I said now that we have inflation they need to raise rates. But he never should have told people he wasn't going to for years.
I don't agree it's hindsight bias. He's an economist. He should have known massive increases in money supply via stimulus spending and quantitative easing worldwide had at least a possibility of causing significant inflation. Those policies increase inflation by design, so it shouldn't seem impossible that they worked. Once you know that, then promising to keep rates low is a foolish thing to do, because you're making a promise you may not be able to keep.
Ukraine/supply chain issues are a factor for sure, which wasn't foreseeable. But we had a giant increase in money supply, much of which was done in a way (direct stimulus to consumers) that also gives it a high velocity of money, since consumers are more likely to spend the cash than bondholders who get bought out in QE. I'm not saying he should 100% know the future, because I agree he isn't an oracle. But this was an eminently possible future so he shouldn't have promised he wouldn't take the obviously required action.