Fed Ponders Catchup With Economic Theory Signaling Rates Too Low

Bloomberg reports:

When does treading carefully lead to falling behind?

Federal Reserve officials signaled last week that they expect to raise interest rates twice this year, while investors see only one move. If economic theory is any guide, even the central bank’s more hawkish outlook would still leave the target for the benchmark policy rate way too low.

That’s going by a policy rule named after Stanford University economist John Taylor that plugs inflation, output and other data into an equation to calculate the right level of interest. Some lawmakers want to make such a rule binding on the central bank.

The gap between theory and practice arises because officials don’t want to choke off the recovery with rate hikes that may be appropriate on paper, but not digestible in reality. In doing so, they’re taking fire from critics who say low rates are a mistake that could trigger an asset bubble or inflation.

Price fixing always fails. Wouldn't most of us be better off with a free market in money like America had before 1914?