With @Kathleen_Hays on Central Bank Central The case for nominal GDP targeting and the Fed's so-called "problem" of tariffs. https://t.co/h6lpIEw95V

Nice! Definitely true at BC. https://t.co/0NaP2sMZz9

My student @AlessandroLavia is conducting a job search this year. Alessandro is amazingly productive, with 6 projects well underway in international finance and macro. He's great colleague too, with many collaborators including @micheleboldrin. https://t.co/lEhud6jRPO

The Shadow Open Market Committee, w/special guest Michael Faulkender, will meet in New York City on Fri, Nov 7. I'll be discussing nominal GDP targeting and tariffs. If you'd like to attend, just let me know and I'll send you an invite.

In his speech, Miran admirably concedes that he could be wrong, and I owe him the same courtesy. But, from a quantity-theoretic perspective, it's hard to justify more than one or two additional rate cuts.

And, looking ahead, it seems quite possible that NGDP growth will come in at or even above 5 percent annualized in each of the four quarters starting 2025Q3. These trends just don't seem consistent with the view that the funds rate is 200 bp above the natural rate.

But it is also extremely useful, given uncertainty over the natural rate and implied stance of monetary policy, to look at trends in M2 and nominal GDP growth as a cross check. Lately, M2 growth has been accelerating.

The second is that uncertainty over estimates of the natural rate of interest underlie most of the disagreement over the appropriate setting for the federal funds rate. This, too, is surely true.

The first is that there are powerful supply-side forces that will likely make economic growth much stronger, and measured inflation lower, than most analysts, probably because of their obsession with tariffs, are expecting right now. I certainly agree with him on that.

In yesterday's remarks, Stephen Miran made two very useful and under-appreciated points.

Tariffs don't have to be a "problem" for the Fed. From me and @cwcalomiris

The authors are correct: the Fed's ability to affect credit allocation, enabled by paying interest on reserves, led to intense politicization starting in 2008 that has nothing specifically to do with President Trump. The solution is simple: end interest on reserves.

"The devolution of federal reserve monetary policy strategy, 2012–24," by @PIrelandEcon of @BostonCollege. #FederalReserve #DualMandate #PhillipsCurve ⬇️OPEN ACCESS⬇️ https://t.co/2gdLPwPChY

The Robustness Properties of Nominal GDP Targeting https://t.co/XagLRXXBav This short paper enumerates NGDP targeting's advantages and highlights what the recent behavior of NGDP tells us about the appropriate path for monetary policy going forward.

I hope @j_fishback is on the short list for the Fed slot. James is a clear and independent thinker, and a man of action. He'd be a welcome addition to the Board of Governors.

Finally, consensus forecasts seem far too pessimistic to me. Real GDP growth is likely to accelerate in 2026, perhaps running at 3 percent for the year, as investment postponed this spring is brought back on line and as fiscal and regulatory incentives really kick in.

These data justify one or two interest rate cuts late summer and early fall, then wait-and-see from there as new data continue to come in. Of course it would be far better to manage rates according to a pre-announced rule. But here I'm assuming discretion continues to prevail.

Monetary velocities have also largely converged back to flexible estimates of their long-run trends, also consistent with overall normalization of monetary conditions.

Year-over-year M2 growth of 4.3 percent if measured using simple-sum and 3.6 percent if measured using Divisia suggests that monetary policy is close to neutral though by my preferred Divisia measure still somewhat restrictive.

Year-over-year growth in total dollar spending was 4.5 percent in 2025Q2, down slightly from 4.7 percent in 2025Q1 and more significantly from 5.6 percent in 2024Q2. All consistent with continued easing of inflationary pressures.