I had high hopes of the Federal Reserve’s annual Jackson Hole conference. The conference was billed as a forum that would look at new approaches to the conduct of monetary policy — something I have been urging as necessary given secular stagnation risks and the sharp decline in the apparent neutral rate of interest. And the speech by Fed chairman Janet Yellen in a relatively academic setting provided an opportunity to signal that the central bank recognised new realities required new approaches.

The Federal Reserve system and its chair are to be applauded for welcoming challengers and critics into their midst. The willingness of many senior officials to meet the Fed Up group of community activists is also encouraging. And it is important for critics like me to remember that the policy explorations of today often become the conventional wisdom of tomorrow. In this regard the fact that the Fed has now recognised that the decline in the neutral rate is something that is much more than a temporary reflection of the financial crisis is a very positive sign.

On balance though, I am disappointed by what came out of Jackson Hole — judging by press reports since I was not there. First, the near-term policy signals were on the tightening side, which I think will end up hurting both the Fed’s credibility and the economy. Second, the longer-term discussion revealed what I regard as dangerous complacency about the efficacy of the existing tool box. Third, there was failure seriously to consider major changes in the current monetary policy framework.