Warsh emphasizes that understanding the basic plumbing of financial markets and monetary policy involves many channels beyond just the reaction function.
“That doesn't even have to address the reaction function. It's just the basic plumbing of financial markets and monetary policy, because there are a lot of channels.”
Warsh questions whether the passthrough of rates into expectations has fundamentally altered how inflation works.
“So, the question is whether he thinks the pass-through into expectations has changed the inflation process,”