Trump’s crusade against the Federal Reserve will be self-defeating

Although the Taylor principle is part of a rule that near-perfectly described central banks’ behaviour from 1987 to 1992, at Jackson Hole, Emi Nakamura of the University of California, Berkeley, showed that over a much longer period the Fed has frequently deviated from it. Rich-world central banks often ignore disturbances, trusting that inflation will return to target when the shock subsides. The more credible the central bank, the better this works: expectations of low inflation can be self-fulfilling.