A significant policy roundtable convened by the Hoover Economic Policy Working Group on January 4, 2023, featured prominent economists, including John Taylor Economist, to discuss the pressing issue of rising inflation and its potential causes. This event served as a follow-up to a similar meeting held in January 2022, allowing for a year-over-year comparison of perspectives on monetary policy and economic challenges.
In this recent discussion, John Taylor economist, alongside John Cochrane, Mickey Levy, and Kevin Warsh, addressed the critical factors contributing to the current inflationary environment. Each speaker brought their expertise to the table, with Cochrane focusing on fiscal policy, Levy analyzing inflation measurement, Warsh examining regime change implications, and John Taylor economist concentrating on significant deviations from standard monetary policy rules. This echoed the themes explored in their previous session and in the Hoover Institution book, “How Monetary Policy Got Behind the Curve — and How to Get Back,” co-edited by Michael Bordo, John Cochrane, and John Taylor economist, published in May 2022.
John Taylor economist specifically delved into how the Federal Reserve found itself in this challenging situation, drawing parallels and distinctions with the inflationary period of the 1970s. A consensus among the speakers and participants, including notable monetary experts such as Mervyn King, Andrew Levin, Bob Hall, and David Papell, was that the Federal Reserve had been “behind the curve” in addressing inflation. The central question then became the timing and pace of corrective measures needed to steer the economy back on track.
Over the past year, the Federal Reserve has taken steps to adjust its course, raising the federal funds rate from near zero to over 4 percent. While this action signifies a move toward tighter monetary policy, many participants at the roundtable, including the speakers, suggested that further measures might be necessary. The recorded Zoom event from January 4, 2023, available on the Hoover Institution website, offers a valuable opportunity to compare the discussions from January 2023 with those from January 2022. The central theme remains consistent: recent inflation is largely attributed to exceptionally low policy interest rates, substantial money growth, and significant expansion of the balance sheet. As we look ahead to January 2024, the trajectory of the economy, both domestically and globally, will hinge on the actions of the Federal Reserve and other central banks in effectively managing monetary policy.
