A Quote by Janet Yellen
I'm just opposed to a pure inflation-only mandate in which the only thing a central bank cares about is inflation and not employment.
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The Federal Reserve has an official commitment to two different policies. One is to prevent inflation from getting too high. The second is to maintain high employment... the European Central Bank has only the first. It has no commitment to keep employment up.
the Federal Reserve, has an official commitment to two different policies. One is to prevent inflation from getting too high. The second is to maintain high employment... The European central bank has only the first. It has no commitment to keep employment up.
My bottom line is that monetary policy should react to rising prices for houses or other assets only insofar as they affect the central bank's goal variables - output, employment, and inflation.
For society to function some kind of reasonable balance has to be stuck between the competing interests of creditors and debtors. Although the mandate of the Bank of Canada was to maintain a delicate balance between encouraging growth and fighting inflation, the Bank opted to focus exclusively on fighting inflation. In doing so it came down heavily in favour of those with financial assets to protect, and against those whose primary need was employment.
So: if the chronic inflation undergone by Americans, and in almost every other country, is caused by the continuing creation of new money, and if in each country its governmental "Central Bank" (in the United States, the Federal Reserve) is the sole monopoly source and creator of all money, who then is responsible for the blight of inflation? Who except the very institution that is solely empowered to create money, that is, the Fed (and the Bank of England, and the Bank of Italy, and other central banks) itself?
During the 1970s, inflation expectations rose markedly because the Federal Reserve allowed actual inflation to ratchet up persistently in response to economic disruptions - a development that made it more difficult to stabilize both inflation and employment.
Because food and energy prices are volatile, it is often helpful to look at inflation excluding those two categories - known as core inflation - which is typically a better indicator of future overall inflation than recent readings of headline inflation.
The best way that a central bank can support growth on a durable basis is to ensure inflation is low, stable - there is financial stability - and that is the role that the central bank plays.
The most important thing to remember is that inflation is not an act of God, that inflation is not a catastrophe of the elements or a disease that comes like the plague. Inflation is a policy.
There is no such thing as agflation. Rising commodity prices, or increases in any prices, do not cause inflation. Inflation is what causes prices to rise. Of course, in market economies, prices for individual goods and services rise and fall based on changes in supply and demand, but it is only through inflation that prices rise in aggregate.
The principle that a central bank, charged with controlling inflation, should be independent from the government is unassailable. It may also be true that it's easier for the central bank to guard its independence from political pressure when it mainly holds government securities.
What people today call inflation is not inflation, i.e., the increase in the quantity of money and money substitutes, but the general rise in commodity prices and wage rates which is the inevitable consequence of inflation.
After a long period in which the desired direction for inflation was always downward, the industrialized world's central banks must today try to avoid major changes in the inflation rate in either direction.
Models used to describe and predict inflation commonly distinguish between changes in food and energy prices - which enter into total inflation - and movements in the prices of other goods and services - that is, core inflation.
You could not buy a house in those days without just assuming that the house was not only a place to live, but it was a good investment, because it was going to keep up with inflation or get ahead of inflation, and it was just - that was America.
Inflation is a monetary phenomenon. It is made by or stopped by the central bank.
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