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Narayana Kocherlakota

Don't Try This Crazy Trick on the Economy

Neo-Fisherites want to raise interest rates. That would be dangerous.
Balance takes effort.

Balance takes effort.

Photographer: Angel Navarrete/Bloomberg

Some economists argue that the Federal Reserve should take a highly unconventional approach to ending a long period of below-target inflation: Instead of keeping interest rates low to spur economic activity and push up prices, it should raise rates.

Labeled "Neo-Fisherism" by my Bloomberg colleague Noah Smith (after the famous monetary economist Irving Fisher), it's an idea I once entertained. Allow me to explain why I now think it’s dangerous.