by Frank Shostak
Mises.org
In an interview with National Public Radio’s “Morning Edition” program on Thursday, March 25, 2021, Fed chair Jerome Powell said that even with the economy rebounding faster than expected, any change in monetary policy would happen “very, very gradually over time and with great transparency. Rate increases would only be considered when the economy is all but fully recovered.” Powell also said that “as we make substantial further progress towards our goals we will gradually roll back, the $120 billion monthly bond purchases.”
Currently the Federal Reserve employs a transparent monetary policy framework in order to generate an environment of economic stability. By this framework, the key for economic stability is for the central bank to state clearly the likely course of the monetary policy ahead. Note that in this way of thinking expected monetary policy is a factor of stability while unexpected policy sets shocks and instability.