are they trying to do something like increase E[i] where E[i] is a function of a bunch of lagged terms so they think letting inflation run hot for a decade will correct these expectations that seems insane
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its from WSJ so its possible the columnist has even less idea of what theyre talking about than I do
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. . . what on earth https://fredblog.stlouisfed.org/2020/11/from-inflation-targeting-to-average-inflation-targeting/ …
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Replying to @eigenrobot
i dont know anything about macro and im not a very good economist in general but it seems reasonable to me like if im making long-term investment decisions i probably care more about average inflation than whether they try their best to hit 2% each year?
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Replying to @eigenrobot
idk id have to write down a model heres some more stuff about it thoughhttps://www.dallasfed.org/research/economics/2021/0406 …
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Replying to @NLRG_
you dont have to write math down just make something up its the same thibg
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Replying to @eigenrobot
because everybody knows the fed will keep interest rates low to punish the dollar for not inflating enough, people anticipate future inflation and dont want as many dollars, causing more inflation and getting closer to target reverse happens when inflation overshoots too long
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Replying to @eigenrobot
yeah i think so, like we expect lots of inflation for the next while so we get a really big inflation spike and that mucks up the average so we're overshooting now and everybody expects lots of deflation for the next while etc?
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yeah a lot more policy degrees of freedom too like hmmm over what period are we going to average temptation to permit more inflation because "we can just compensate later" kinda sus
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