Fed keeps interest rate at current level: Debate emerges within it over wisdom of not cutting the rate.

The Federal Reserve has recently announced its FOMC decision to not cut or raise interest rates. But a necessary debate is beginning to emerge among Fed decision takers about the nature of disinflationary and even perhaps deflationary trends in the economy. The header at the Minneapolis branch Neel Kashkari has published an essay examining the risk of deflationary and disinflationary pressure and the apparent weakness of inflationary expectations as once again CPI inflation has failed to meet the 2 % target. There is little evidence that it will anytime soon. Excluding energy prices it is 1.6 % .Supporting his argument is work done by St.Louis Fed branch leader  James Bullard who also is warning that inflationary forces are very weak and are likely to continue to be for some time. The dissenters need to be encouraged and the careful reassessment of natural rate arguments accelerated to ensure growth and low unemployment continue. The other central banks including the Bank of Canada should take note of this debate.

About haroldchorneyeconomist

I am Professor of political economy at Concordia university in Montréal, Québec, Canada. I received my B.A.Hons (econ.&poli sci) from the University of Manitoba. I also completed my M.A. degree in economics there. Went on to spend two years at the London School of Economics as a Ph.D. student in economics and then completed my Ph.D. in political economy at the University of Toronto. Was named a John W.Dafoe fellow, a CMHC fellow and a Canada Council fellow. I also was named a Woodrow Wilson fellow in 1968 after completing my first class honours undergraduate degree. Worked as an economist in the area of education, labour economics and as the senior economist with the Manitoba Housing and Renewal Corporation for the Government of Manitoba from 1972 to 1978. I also have worked as an economic consultant for MDT socio-economic consultants and have been consulted on urban planning, health policy, linguistic duality and public sector finance questions by the governments of Manitoba, Saskatchewan,the cities of Regina and Saskatoon, Ontario and the Federal government of Canada. I have also been consulted by senior leaders of the British Labour party, MPs from the Progressive Conservative party, the Liberal party and the New Democrats on economic policy questions. Members of the Government of France under the Presidency of Francois Mitterand discussed my work on public sector deficits. I have also run for elected office at the municipal level. I first began to write about quantitative easing as a useful policy option during the early 1980s.
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