The Need To Discipline The Fed

You sometimes hear blog posts about whether the Fed should be concerned more with "core" inflation or more with "headline" inflation. The right answer is core, and the better answer is they should actually totally ignore past inflation and target inflation expectations. However, as Niklas Blanchard implies the real institutional dysfunction is that we're talking about this at all:

Core inflation has closely tracked a median ever since the Fed concerned itself with keeping inflation low (and stable). But what you really have to ask yourself is; what good is having a target when you are able to move between whatever measure suits your inclination at the moment? There is, of course, a mechanism by which inflation in energy prices (and thus broad inputs) can translate into a higher trend in core inflation (60′s-80′s), but this hasn't been the case for thirty years.

Outsourcing the operational conduct of monetary policy to a group of kinda sorta apolitical technocrats is a great idea. But by giving them an extremely hazy mandate and then letting them work in secret, we've created an accountability-free zone. Last summer my HVAC was broken so I hired an apolitical technical expert (viz, HVAC repair guy) to deal with the situation. After he worked on it for a while the HVAC machine was working again so I paid him. While I may not have the requisite knowledge to fix an HVAC machine, I can assess wether or not the room gets cooler when I put the AC on. By the same token, if there were anything at all we were specifically telling the Fed to try to do, we could then as citizens clearly assess whether or not they're doing it. Instead, individual governors can basically play Calvinball between switching inflation measures, talking dual mandates, hand-waving about what "price stability" amounts to, etc.