Thursday, November 15, 2007

The WSJ follows my call

The Wall Street Journal is warming up to my idea that the Federal Reserve should stop caring about growth. In an editorial today, the newspaper says that “the Full Employment and Balanced Growth Act of 1978 deserves to be repealed. Also known as the Humphrey-Hawkins, this is the law that mandates that the Fed consider both price stability and full employment in making monetary policy decisions. […] this dual mandate makes it impossible for the Fed to target only inflation the way, say, the European Central Bank is mandated to do.” The WSJ wraps up with these words "setting monetary policy by a genuine price rule would be better." (Read the editorial here.)

The editorial comments on yesterday’s speech by Ben Bernanke. The Fed's chairman brought up the virtues of inflation targeting, but was very careful to point out that the Fed should continue to put equal weight on growth and inflation.

It's nice to hear, though, that an American mainstream paper supports the idea of a more hawkish, ECB-style central bank.

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