> ... and they look at the recession as a necessary goal to tame inflation.
Necessary goal, or necessary evil? I'd really like to see a citation for the Fed explicitly targeting a recession. I used to work with a former senior Fed economist (though, in the capacity I worked with him, he was researching market microstructure, not macroeconomics), and I have another friend who currently works at the Fed. In thhe past 3 rate hike cycles, I've heard lots of talk about the difficulty of a "soft landing" in taming inflation without tanking the economy.
Everything I've heard this tightening cycle has praised the near-miracle soft landing they seem to have achieved.
Taken as a control theory problem, the economy has very noisy measurements, heavy hysteresis, and a relatively long lag for all of the effects of rate changes to ripple through the economy. My understanding is that under-shooting the landing can result in long-term inflation psychologically taking root, creating more problems in the future, so the Fed tends to err on the side of triggering a recession.
I've only read the full minutes of a handful of Fed meetings, so maybe I've missed something. I'm prepared to have my mind changed, but I'm highly skeptical a recession has ever been a goal rather than a regrettable side-effect.
Necessary goal, or necessary evil? I'd really like to see a citation for the Fed explicitly targeting a recession. I used to work with a former senior Fed economist (though, in the capacity I worked with him, he was researching market microstructure, not macroeconomics), and I have another friend who currently works at the Fed. In thhe past 3 rate hike cycles, I've heard lots of talk about the difficulty of a "soft landing" in taming inflation without tanking the economy.
Everything I've heard this tightening cycle has praised the near-miracle soft landing they seem to have achieved.
Taken as a control theory problem, the economy has very noisy measurements, heavy hysteresis, and a relatively long lag for all of the effects of rate changes to ripple through the economy. My understanding is that under-shooting the landing can result in long-term inflation psychologically taking root, creating more problems in the future, so the Fed tends to err on the side of triggering a recession.
I've only read the full minutes of a handful of Fed meetings, so maybe I've missed something. I'm prepared to have my mind changed, but I'm highly skeptical a recession has ever been a goal rather than a regrettable side-effect.