Fed Exit Strategy? Where is the Article on the Fed Strategy for Full Employment?

The NYT has an analysis this morning of the Fed's "exit strategy" from its quantitative easing policy that was designed to support the economy after the collapse of the housing bubble. It seems that the Fed is pursuing an exit strategy, so it is reasonable for the NYT to report on the policy.

However, this implies the Fed is also violating the law that governs its operation. The law requires it to pursue the goals of price stability and high employment, which is defined as 4.0 percent unemployment. The Fed's own projections show the unemployment rate remaining above 5.0 percent for the next 5 years. With no serious threat to price stability on the horizon (the core inflation rate has been falling), there is no obvious justification for the Fed's failure to more aggressively pursue expansionary policy.

The NYT and the rest of the media should be running stories on the Fed's blatant violation of the law.

--Dean Baker

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