January 20, 2020

Economix Blog: For Fed Presidents, Economics Is Local

The Federal Reserve’s dissenters often are portrayed as ideologically motivated. They are said to oppose the Fed’s stimulus campaign because they are more worried about inflation, or less worried about unemployment, than their peers.

But it is fascinating to consider that the four Fed districts whose presidents have dissented most frequently are also the Fed districts that had the fastest economic growth between 2008 and 2011, the most recent year for which data is available.

“Specifically, the four fastest-growing districts since the crisis erupted have been Dallas, Minneapolis, Kansas City and Richmond,” the Citigroup economists Nathan Sheets and Robert A. Sockin wrote in a research note earlier this month. “Presidents from these four districts have cast a historically significant 28 dissents for tighter policy since the fall of 2007, the vast majority of such dissents.” (I first learned about the note from a blog post by Victoria McGrane of The Wall Street Journal.)

The Chicago Fed’s district, by contrast, had the weakest growth, and its president, Charles Evans, has twice dissented in favor of doing more. He played a key role in pushing the Fed to undertake the latest expansion of its stimulus campaign.

This linkage of region and outlook only goes so far, as the authors are quick to concede. The Boston Fed’s district ranked fifth in growth, but its president, Eric Rosengren, is a leading proponent of additional asset purchases. The Philadelphia Fed’s district ranked near the bottom of the growth table, but its president, Charles Plosser, has dissented over concerns about inflation. And the president of the Minneapolis Fed, Narayana Kocherlakota, has left the ranks of conservative dissenters to become the only Fed official who still wants to do more.

Still, the pattern is striking. The evidence suggests regional presidents are seeing the national economy through the lens of local experience. Which, as it happens, is exactly what they are supposed to be doing. The Fed’s structure was meant to ensure that regional perspectives were heard. It seems to be working.

Article source: http://economix.blogs.nytimes.com/2013/02/28/for-fed-presidents-economics-is-local/?partner=rss&emc=rss