Economists and monetary policy wonks have been screaming about this for months -- sometimes at each other. Now economists at investment giant Goldman Sachs are on board. In a proprietary analysis for clients, Goldman economists Jan Hatzius and Sven Jari Stehn say the Federal Reserve should announce publicly that it will pursue a bit of inflation, and make good on that goal with looser monetary policy -- a new round of so-called "Quantitative Easing."
From the analysis: "[W]e believe that the Fed's most promising option for delivering significant further policy easing would be a shift to a nominal GDP level target coupled with large-scale asset purchases.
This is precisely the sort of action senior Republicans in Congress have been warning chairman Ben Bernanke against taking, and it's a matter of controversy among members of the Fed's Open Market Committee, where these decisions are made. But a growing number of Fed board members and outside experts are speaking out in favor of an option like this -- arguing essentially that the Fed should, for now, focus on the full employment side of their dual mandate to grow the economy and keep inflation low. Having Goldman Sachs on their side can't hurt.
Read the whole analysis below.