Some Like the Economy Hot: Or, Reviving the Monetarist/Keynesian Debate

In 2017 and early 2018, inflation regularly fell below the FOMC's two-percent inflation target. To raise inflation, the FOMC pursued a policy of allowing growth to run above potential to create a positive output gap. A positive output gap would, it was assumed, create wage inflation, which would pass through to price inflation. This policy possessed the hallmarks of the activist policy of the 1970s. The question then arises of whether it will produce the same destabilizing go-stop cycle.