Vice Chair of the Fed Janet Yellen looks at a number of monetary policy rules and concludes that U.S. monetary policy has been too tight (my bold):
[R]esource utilization rates have been so low since late 2008 that a variety of simple rules have been calling for a federal funds rate substantially below zero, which of course is not possible. Consequently, the actual setting of the target funds rate has been persistently tighter than such rules would have recommended. The FOMC’s unconventional policy actions–including our large-scale asset purchase programs–have surely helped fill this “policy gap” but, in my judgment, have not entirely compensated for the zero-bound constraint on conventional policy. In effect, there has been a significant shortfall in the overall amount of monetary policy stimulus since early 2009 relative to the prescriptions of the simple rules that I’ve described.
Finally, a prominent Fed official acknowledges what Market Monetarists have been saying for some time: over the past 3 years the Fed has failed to adequately ease monetary policy and thus has passively tightened. Fed chairman Ben Bernanke acknowledges this possibility, but for obvious reasons is less willing to admit that the Fed is guilty of it. What Yellen and Bernanke both need to embrace is a NGDP level target. This approach would allow the Fed to make up the cumulative shortfall created by the Fed’s passive tightening while at the same time keeping long-term inflation expectations anchored. What more could a Fed governor want?