In a recent speech, Charles Plosser, president of the Philadelphia Federal Reserve, criticized current Fed policy and the response to the financial crisis.
Philadelphia Fed President Charles Plosser gave a major speech on Monday at the Central Bank of Chile. In the polite language of central bankers, the speech constitutes a systematic criticism of not only current Fed policy but of the Fed’s entire response to the financial crisis.
Plosser’s speech updates Milton Friedman’s 1967 presidential speech to the AEA and quotes from it. “…We are in danger of assigning to monetary policy a larger role than it can perform, in danger of asking it to accomplish tasks that it cannot achieve, and, as a result, in danger of preventing it from making the contribution that it is capable of making.”
In Friedman and Plosser’s analysis, the sole contribution monetary policy can make is price stability. What, in the current context, can monetary policy not achieve? Plosser enumerates impossible goals of monetary policy.