When standard-bearer economic relationships no longer seem to apply, there is little sense in running a data dependent monetary policy. Reading through these minutes this seems to be the core debate among FOMC participants – when time-worn relationships aren’t delivering time-worn results, why adjust policy as if these relationships will deliver model results? SF Fed President Williams essentially expounds on this point in his August 15 “FRBSF Economic Letter”. He comes down on the side of needing different prescriptions, Chair Yellen probably does too (as we will likely hear in her speech next week at Jackson Hole) and, based on our read of the minutes, so does most of the FOMC.
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