What the Fed needs, then, is a policy framework that gets interest rates up and keeps them there. Its 2 percent inflation target just isn't getting the job done. A 4 percent target might, or, if that was too much, maybe a more flexible 2 percent target that tried to make up for any past shortfalls by letting prices go up by more than that later so that inflation averaged 2 percent over the course of the business cycle. But somethingneeds to change. Otherwise, interest rates are going to keep falling to zero every time there's a recession, recessions are going to keep being worse than they need to be because the Fed will have trouble doing enough to help the economy, and recoveries are going to keep being slow for the same reason.
