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Wednesday, September 22, 2010

SBE Council Chief Economist on What FOMC Should Have Said

Raymond J. Keating, chief economist for the Small Business & Entrepreneurship Council (SBE Council), issued the following alternative to the Federal Open Market Committee's statement this week:

"The FOMC saying that it wants higher inflation is very worrisome, to say the least. The FOMC should have said something very different, such as the following:

"The experiment of trying to use monetary policy to increase aggregate demand and economic growth has proven to be a failure. We now believe that monetary policy best aids economic growth when focused exclusively on maintaining price stability. As a result, the process of reining in the excessive growth in the monetary base from the past two years will begin. While this will help to reduce the risk of future inflation, economic growth and job creation desperately need a change in direction in terms of fiscal policy.

"Fiscal policy, of course, is the domain of Congress and the White House, but economics and history make clear that the best policy combination for the economy is having monetary policy zeroed in on price stability, and fiscal policy focused on establishing a favorable climate in which work, entrepreneurship, business, and investment can thrive, which means substantive tax and regulatory relief, and reining in government spending."

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