James Bullard, president of the St. Louis Federal Reserve Bank, notes that with its target rate at 1 percent, the Federal Reserve doesn’t have much more room to manage the economy by cutting rates. In a speech yesterday in Evansville, Ind., Bullard said:

Whether the FOMC (Federal Open Market Committee) decides to stay on hold at this point or eases further and then stays on hold at some lower level, even zero, may not be the most critical question. The fact is, monetary policy defined as movements in short-term nominal interest rates is coming to an end, at least for now. It’s a funeral for a friend.

The end of nominal interest rate targeting in the U.S. for the near term means that much more attention will have to be paid to alternative ideas about controlling inflation and inflation expectations going forward.

 Does he have some ideas? Of course:

One idea from the Japanese experience is that, with nominal interest rates at very low levels, more attention may have to be paid to quantitative measures of monetary policy. By announcing and maintaining targets for key monetary quantities, the Fed may be able to keep inflation and inflation expectations near target and ward off either a drift toward deflation or excessively high inflation. This will be an important issue for the Fed in coming months and represents a challenge in the communication of monetary policy going forward.

Interestingly, the St. Louis Fed has a long and proud history of studying the behavior of quantitative money-supply measures. If Bullard is right, it’s time to others to join in that line of research.