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Narayana Kocherlakota

How the Fed Turns Good News Into Bad

Events that lower inflation should allow the central bank to create more jobs. But it doesn't.
Positive shock.

Positive shock.

Photographer: Christopher Furlong/Getty Images

Pop quiz! Are these events good news or bad news for the Federal Reserve?

In principle, all would reduce inflation. With more steel capacity, there would be downward pressure on steel prices. With better extraction technologies, oil and gas prices would tend to be lower.  And robotics enhancements would weigh on both wages and prices.