What is Our Monetary Policy?

What is the monetary policy of the United States? No one knows. The Federal Reserve does not know because it does not have a policy that looks ahead more than a few months, and it avoids any attempt to develop one. It announces annual targets but does not adopt procedures capable of achieving them. Part of the administration frets publicly about monetary policy from time to time, but the administration has no authority to develop a monetary policy. The Congress has constitutional responsibility for money, but it is unwilling to require the Federal Reserve to announce and implement a long-term policy. It seems content to let the Federal Reserve announce its objectives at public hearings and then ignore them. Congress neither requires the Federal Reserve to achieve its announced targets nor to explain why there is little relation between what the Federal Reserve says and what it does.