OPINION: Interest rates and the Fed’s great ‘slack’ debate
Posted on AllSides August 11th, 2014
From The Center
OPINION
Call it the great “slack” debate. For nearly six years, the Federal Reserve has held short-term interest rates near zero to boost the economy. Is it time to consider raising rates to preempt higher inflation? The answer depends heavily on the economy’s slack: its capacity to increase production without triggering price pressures. Although economists are arguing furiously over this, there’s no scientific way to measure slack. Economic policymaking is often an exercise in educated guesswork, built on imperfect statistics, shaky assumptions, incomplete theories and political preferences. This is an instructive...