Narayana Kocherlakota, Columnist

The Fed Is Planning for Another Slow Recovery

It will accept too little inflation and too much unemployment for too many years after the next recession.

September 13, 2016 at 12:30 PM UTC

Narayana Kocherlakota is a Bloomberg Opinion columnist. He is a professor of economics at the University of Rochester and was president of the Federal Reserve Bank of Minneapolis from 2009 to 2015.

Nice peaks and troughs.
Photographer: David Paul Morris/Bloomberg

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Last month, U.S. Federal Reserve Chair Janet Yellen gave an important address at the Jackson Hole public-policy conference. She argued in part that, thanks to its new tools of forward guidance and long-term asset purchases, the Fed would be able to offset the next recession, even if interest rates eventually stabilized at historically low levels. (Her assessment was criticized by others, perhaps most notably by Larry Summers, as unduly optimistic.)

Yellen’s speech reveals that the Fed remains dangerously unwilling to pursue with appropriate vigor its objectives of 2 percent inflation and maximum employment.