Commenter Jeff on FAIT
I have expressed a great deal of frustration with the Fed’s “Flexible Average Inflation Target”, which does not target the average inflation rate. Commenter Jeff recently made the point much more effectively than I could have done. I thought it was worth bringing his comment to the attention of readers that do not bother with the comment section:
Let’s not forget that the meaning of “FAIT” was extremely unclear to you, your readers, and even some of the Fed’s own researchers through the better part of 2021. Both the plain English and technical meanings of the word “average” imply that both undershoots and overshoots will be compensated for. Anything else is not properly described as an “average”. Monetary policymakers do not have license to redefine mathematics any more than energy policymakers get to redefine the fundamental constants of the physical universe. No doubt many professional Fed-watchers saw through the murky verbiage and were able to personally benefit as a result, but I’m not exactly a fan of societies where only courtiers and palace whisperers know what is really going on because the royals speak a different language from everyone else.
Jeff nailed it.
Next year, the Fed plans to review its targeting strategy. Let’s hope they come up with a less confusing approach.
PS. I notice that 2023:Q3 NGDP growth came in at 8.5%—still way too fast. I see very little evidence for the “tight money policy” that everyone keeps talking about. What is the evidence that money is tight?