Monetarist resurrection, or timely rethink of inflation targeting?

LONDON, Aug 27 (Reuters) - Be careful what you wish for. In reviving the Federal Reserve's long-dormant money-supply debate, Chair Kevin Warsh has created a headache for himself — and for the U.S. president who appointed him. Many of those most likely to cheer his monetarist turn are also most likely to want interest rates higher, not lower.

Some of the biggest critics of using inflation targeting alone to guide the Fed toward its mandate of stable prices think the wider financial picture and the current AI investment frenzy are reasons to consider whether policy is tight enough.

Heading to the annual Jackson Hole symposium this week, Warsh has already set in motion a review of Fed functioning, with five task forces examining everything from communications and forecasting to inflation measurement, data quality, productivity and the use of the balance sheet. Much of the discussion at the central banking jamboree in Wyoming is likely to be about the task forces, and some have billed these examinations as the most consequential review of U.S. monetary policy since the Fed adopted a formal 2% inflation target in 2012.