August 25, 2016
The New York Times had a good piece about how the Federal Reserve Board is responding to protests of Fed policy and insufficient concern about unemployment by the group Fed Up. (CEPR is affiliated with the Fed Up campaign.) At one point the piece quotes Esther George, the president of the Kansas City Fed, as saying that she is sympathetic to concerns about unemployment, but that if the Fed is too slow in raising interest rates it can lead to inflation and asset bubbles.
It is worth noting that Ms. George has been expressing this concern about inflation for the last three and a half years, a period in which there has been no noticeable increase in the inflation rate. While there are real reasons to be concerned about asset bubbles (like the stock bubble in the 1990s and the housing bubble in the last decade), higher interest rates are a very poor tool for combating bubbles.
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