Well at the 1 August FMOC meeting there was some discussion on introducing the use of ”Simple Rules for Monetary Policy”. See the minutes below.
Could we be getting set up for such an announcement at this September 12/13 FMOC meeting ? You know the Evans Rule ?!
The Chicago Fed chief has repeatedly called on his colleagues to make their commitment to low interest rates more explicit, arguing that the central bank should say it won’t raise rates until the unemployment rate falls below 7 percent or inflation rises above 3 percent.
So would this make sense ? You know instead of the FMOC saying lets keep interest rates low until 2015 (thus pushing the current 2014 date out) they might say we will keep rates low as long as the rule applies.
But why not 7% unemployment or 4% inflation ?
I am guessing Evans figures 7% unemployment or 3% inflation is accommodative enough and will be viewed as stimulative without requiring the announcement of actual QE measures. It might also not cause too much panic by the inflation hawks and if it is not successful in creating jobs it can always be adjusted in 2013/14 ?!
This is an experiment after all !