Stanley Fischer argues for Central Bank Discretion

In a speech yesterday, Fischer says: Today I will offer some observations on monetary policy rules and their place in decision-making by the Federal Open Market Committee (FOMC). I have two messages. First, policymakers should consult the prescriptions of policy rules, but–almost needless to say–they should avoid applying them mechanically. Second, policymaking committees have strengths that policy rules lack. In particular, committees are an efficient means of aggregating a wide variety of information and perspectives. Subsequently, John Taylor’s research, especially his celebrated 1993 paper, was a catalyst in changing the focus toward rules for the short-term interest rate. Taylor’s work thus…

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