Alexander William Salter urges central banks to target nominal GDP
Updated
Updated · Barron's · Apr 30
Alexander William Salter urges central banks to target nominal GDP
3 articles · Updated · Barron's · Apr 30
In a Barron’s commentary, the Texas Tech professor argued this after the Federal Reserve held rates steady for a third time this year amid inflation above 2%.
He said inflation targeting misreads supply-driven price rises from wars, trade tensions and energy shocks as excess demand, leading policymakers to tighten unnecessarily and hurt output and employment.
Salter argued nominal GDP targeting would better anchor expectations and separate demand from supply shocks, while saying the Fed let nominal GDP surge too far in 2021 and 2022.
Could switching to nominal GDP targeting actually stabilize economies facing both energy shocks and rapid AI-driven productivity gains?
How might persistent above-target inflation and uncertain monetary policy reshape investment decisions and business planning through 2026?
If AI accelerates productivity and raises real rates, will central banks' current frameworks be obsolete before they can adapt?