What Monetary Policy Can and Cannot Do

One of the peculiar aspects of my return to the monetary policymaking arena has been the media’s interest in labeling me a “hawk” or “dove,” or someone who is anti-inflation or pro-growth. I regularly receive calls from reporters when economic statistics are released asking about my reactions to the numbers so that they can speculate on how I might vote at the next Federal Open Market Committee meeting. “Fedwatchers” — a fraternity I once belonged to — other market participants, and the media have increasingly focused on interpreting policymakers’ actions and on the minutiae of implementing policy. This focus has contributed to confusion about what monetary policy can and cannot do and has added to the age-old confusion between money and credit.