With (a) the US economy nowhere back to its pre-recession job and GDP trends, and (b) inflation nowhere to be found, it is disappointing that the Fed seems on the verge of doing less rather than more. I have to say, I more or less agree with Paul Krugman here:
Why is this happening? Part of the reason is that the Fed is constantly under pressure from monetary hawks, who always want to see tighter money and higher interest rates. These hawks spent years warning that soaring inflation was just around the corner. They were wrong, of course, but rather than change their position they have simply invented new reasons — financial stability, whatever — to advocate higher rates. At this point it’s clear that monetary hawkery is mainly a form of Puritanism in H. L. Mencken’s sense — “the haunting fear that someone, somewhere may be happy.” But it remains dangerously influential.
What the “new normal’ really means is establishing a new economic baseline, looking forward, and forgetting about the past. So if we get 3% growth and 200,000 jobs a month, that’s not so bad. And it wouldn’t be — if we had a catch-up phase after the Great Recession. But we didn’t. Thus the gaps. Instead of acting as if the worst is over, Washington should be treating the current recovery as the long economic emergency that it really is.