The Federal Reserve Ignores the Money Supply at its Peril

The Fed should pay much more attention to the money supply numbers, especially when those numbers swing from a record pace of increase to one of contraction.

Milton Friedman must be rolling in his grave at the thought of how his basic monetary policy teachings have fallen out of favor.

Federal Reserve Chair Jerome Powell never so much as mentions the money supply in discussing the U.S. economic and inflation outlook.

In pursuing a strictly data-dependent monetary policy, Mr. Powell has forgotten that monetary policy operates with long and variable lags.

Meanwhile, a growing chorus of prominent economists claim that inflation, both on the…