Harvard Kennedy School of Government professor Jason Furman shares his perspective on Federal Reserve policy rules with Market Domination hosts Julie Hyman and Josh Lipton, advocating for a more structured approach to monetary policy decisions.
"I used to be skeptical," Furman acknowledges, but he now supports having the central bank publish explanations every six weeks detailing how its actions align with or deviate from established rules. He believes this would add greater "weight" and clarity to its decision-making process.
Using December's rate cut as an example, Furman points out an apparent disconnect: Despite higher-than-expected inflation and lower unemployment, the Fed proceeded with the cut. "I think that's just because they said they were going to cut rates, and everyone expected they were going to cut rates," he states.
Furman suggests that following a clear rule system would help the public better understand when the Fed maintains its fundamental position while adjusting interest rate decisions based on incoming data.
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"This is just putting a little bit more weight on what's worked well in the past and a little bit less weight on their judgment because we all like to think we have great judgment," Furman explains. "Theirs is better than most, but it's still pretty fallible."
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This post was written by Angel Smith