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No, that's not what Powell is saying. Read this quote again: > So I will answer—I will answer your question directly, but I want to start here today by saying

No, that's not what Powell is saying. Read this quote again: > So I will answer—I will answer your question directly, but I want to start here today by saying that my main message has not changed at all since Jackson Hole. The FOMC is strongly resolved to bring inflation down to 2 percent, and we will keep at it until the job is done. So the way we’re thinking about this is, the overarching focus of the Committee is getting inflation back down to 2 percent. To accomplish that, we think we’ll need to do two things, in particular: to achieve a period of growth below trend; and also some softening in labor market conditions to foster a better balance between demand and supply in the labor market. Powell says (paraphrasing slightly): "In order to get inflation under 2%, we need to do two things. 1. achieve a period of low growth, and 2. soften the labor market." Low growth and higher unemployment aren't simply side-effects of Powell's policy. These two things are explicitly stated goals.

AnimalMuppet 4y ago
No. That quote still doesn't support your assertion. It clearly says that the actual goal is to control inflation.
- deleted 4y ago
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JumpCrisscross 4y ago
Would it be correct to say the Fed's goal is to lower economic growth? I don't think so. It's trying to lower inflation and predicting negative, possibly necessary, side effects. But if you read that quote as saying the Fed is trying to raise unemployment, then it's also saying the Fed is trying to lower growth, which is an odd reading to say the least.
- im-a-baby 4y ago
  I think we're arguing over the definition of goal and side-effect. Let's say I have a goal of running a marathon, so I decide to start jogging every day. Is my daily jogging a side-effect of my goal to run a marathon? I wouldn't say so. Rather, jogging every day is an explicit course I've set out on with the hopes of achieving my main goal. Daily jogging is a sub-goal of the main goal, if you will. This logic can be applied to the Fed. The main goal is to lower inflation, and the chosen course of action (i.e. the sub goals) are to lower economic growth and to increase unemployment. A side-effect would be something akin to knee pain. I can't jog without hurting my knees, but having pain in my knees isn't something I explicitly set out to do. A side-effect of Fed policy would be something like the gilt crises in the UK. Higher US rates increase yields on UK bonds indirectly. But that isn't something the Fed is actively setting out to do.
  - JumpCrisscross 4y ago
    > Let's say I have a goal of running a marathon, so I decide to start jogging every day. Is my daily jogging a side-effect of my goal to run a marathon? You can't run a marathon without your daily jogs. Inflation can be lowered without spiking unemployment. It's unlikely. Hence the Fed's messaging. But until recently the Fed forecasted a soft landing, i.e. growth and low unemployment amidst rising rates and falling inflation. Better analogy: engine temperature. You're driving and keeping an eye on the thermometer. You see the temperature is low and so feel comfortable accelerating. The goal is getting to your destination faster. The low temperature lets you accelerate, which in turn raises the temperature. But raising the engine temperature wasn't the point. It reverses cause and effect to say your goal was to raise engine temperature. It wasn't. Engine temperature was simply a limiting factor you were paying attention to.
    - im-a-baby 4y ago
      Using analogies is always dangerous because they're never going to be a perfect fit. But the difference between your engine analogy and the federal reserve's actions is that anemic economic growth and high unemployment is not a side effect. In your engine analogy, adding more gas and air into the engine increases the amount combustion. It's the combustion that increases speed, so in a sense increase combustion is a goal. Released heat is just a by product of the reaction. In the economy, the amount of economic activity and the amount of available labor are what drive prices, so these things are the combustion in the piston, not a byproduct.
      - JumpCrisscross 4y ago
        > amount of economic activity and the amount of available labor are what drive prices The relationship is sufficiently complex to permit e.g. falling unemployment, falling (not negative) wage growth, falling (including negative) growth and falling inflation. It's not a deterministic system. > in a sense increase combustion is a goal No, it's not, because the goal--reaching the destination quickly--would be accomplished equally well in an electric car with no combustion. That's the difference between a goal and an effect.

AnimalMuppet 4y ago

No. That quote still doesn't support your assertion. It clearly says that the actual goal is to control inflation.

deleted 4y ago
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JumpCrisscross 4y ago

Would it be correct to say the Fed's goal is to lower economic growth? I don't think so. It's trying to lower inflation and predicting negative, possibly necessary, side effects. But if you read that quote as saying the Fed is trying to raise unemployment, then it's also saying the Fed is trying to lower growth, which is an odd reading to say the least.

im-a-baby 4y ago
I think we're arguing over the definition of goal and side-effect. Let's say I have a goal of running a marathon, so I decide to start jogging every day. Is my daily jogging a side-effect of my goal to run a marathon? I wouldn't say so. Rather, jogging every day is an explicit course I've set out on with the hopes of achieving my main goal. Daily jogging is a sub-goal of the main goal, if you will. This logic can be applied to the Fed. The main goal is to lower inflation, and the chosen course of action (i.e. the sub goals) are to lower economic growth and to increase unemployment. A side-effect would be something akin to knee pain. I can't jog without hurting my knees, but having pain in my knees isn't something I explicitly set out to do. A side-effect of Fed policy would be something like the gilt crises in the UK. Higher US rates increase yields on UK bonds indirectly. But that isn't something the Fed is actively setting out to do.
- JumpCrisscross 4y ago
  > Let's say I have a goal of running a marathon, so I decide to start jogging every day. Is my daily jogging a side-effect of my goal to run a marathon? You can't run a marathon without your daily jogs. Inflation can be lowered without spiking unemployment. It's unlikely. Hence the Fed's messaging. But until recently the Fed forecasted a soft landing, i.e. growth and low unemployment amidst rising rates and falling inflation. Better analogy: engine temperature. You're driving and keeping an eye on the thermometer. You see the temperature is low and so feel comfortable accelerating. The goal is getting to your destination faster. The low temperature lets you accelerate, which in turn raises the temperature. But raising the engine temperature wasn't the point. It reverses cause and effect to say your goal was to raise engine temperature. It wasn't. Engine temperature was simply a limiting factor you were paying attention to.
  - im-a-baby 4y ago
    Using analogies is always dangerous because they're never going to be a perfect fit. But the difference between your engine analogy and the federal reserve's actions is that anemic economic growth and high unemployment is not a side effect. In your engine analogy, adding more gas and air into the engine increases the amount combustion. It's the combustion that increases speed, so in a sense increase combustion is a goal. Released heat is just a by product of the reaction. In the economy, the amount of economic activity and the amount of available labor are what drive prices, so these things are the combustion in the piston, not a byproduct.
    - JumpCrisscross 4y ago
      > amount of economic activity and the amount of available labor are what drive prices The relationship is sufficiently complex to permit e.g. falling unemployment, falling (not negative) wage growth, falling (including negative) growth and falling inflation. It's not a deterministic system. > in a sense increase combustion is a goal No, it's not, because the goal--reaching the destination quickly--would be accomplished equally well in an electric car with no combustion. That's the difference between a goal and an effect.