Could the Federal Reserve lower unemployment by revamping its goals?
Sep 17th 2011 | from the print edition
[Greg Ip] THE Federal Reserve has scored highly for creativity over the course of the economic crisis. It has already, in effect, lowered short-term interest rates to zero, and carried out two rounds of quantitative easing (QE), the purchase of government bonds with newly printed money. On August 9th it surprised the market by saying it expected to hold its short-term interest rate where it is until mid-2013. By removing any expectations of monetary tightening before then, the announcement delivered a powerful downward jolt to bond yields. The Fed also disclosed it had discussed other policy options and was “prepared to employ these tools as appropriate”. That has fuelled speculation that the Fed will play yet another card when its policy-setting committee gathers for an extended meeting on September 20th-21st.