How to explain weird monetary policy to normal people

Financial Times
Robin Harding, US Economics Editor
January 2014

Why the Fed does what it does

The Federal Reserve today did X...

“…in an effort to stimulate the economy by driving down longer-term interest rates.”

QE

“Under QE, a central bank buys long-term assets in order to reduce the supply available to private investors, and thus drive down long-term interest rates…”

Forward guidance

“The goal of the new economic conditions is to offer reassurance that rates will stay low for as long as the economy remains weak…”

Things we shouldn’t say (but often do)

• “printing money”
• “flooding the market with liquidity” • “injecting money” • …other such fluid metaphors

The FT’s central banking blog is called “Money Supply”…

…but we probably need a new name

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