Can the Fed increase inflation?

The Washington Post:

The key to all these proposals is that the Fed’s statements and actions can affect inflation expectations, and thus inflation. By spurring a bit more inflation, it can then drive up growth and speed the recovery along. But though the people proposing this know whereof they speak — Woodford is arguably the most respected monetary theorist alive today — there are a number of economists who dispute the idea that the Fed, at the moment, can do much to drive up inflation. Peter Diamond, the Nobel laureate and failed Fed nominee, told Ryan Avent in an interview that although the Fed can set a level of inflation that it’s willing to tolerate, it can’t itself spur inflation. Donald Kohn, who served as vice chairman of the Fed from 2006 to 2010, told me he also doubts the Fed can do much to spur inflation at the moment. The Fed can create inflation, he explained, either by spurring demand so high that there’s upward pressure on prices (obviously, not a problem right now) or by creating credible inflation expectations. “At this point with the economy operating so far below potential and monetary policy having trouble pushing it higher one might wonder whether either of these would be operative right now,” he said in an e-mail. With demand as low as it is now, convincing the markets that inflation is going up might be impossible, so it could be that the Fed just can’t affect inflation expectations for now.  ...
Obviously, it would be great if the Fed had the power to spur growth through higher inflation, and there are a lot of economists who think it does. But it’s not a settled matter by any means.

This is insane! Inflation is a reduction in the price of money. Suppose you became a magical alchemist who could turn worthless dirt into gold at zero cost in any amount. Could you lower the price of gold?  Is this any different from the price of money?  Why? 


Here is Steven Williamson saying that the Fed cannot raise inflation (reduce the price of money).  

While one could find sound reasons why [the inflation] target could be higher [than the Fed's target of 2%], there is nothing the Fed could be doing that it has not already done that could actually increase the inflation rate in the United States.

Bizarre. Numerous third world countries have accomplished inflation.  Germany was able to do it despite its economy being devestated by World War I.  What stops the US from being able to do it if there are 'sound reasons' to do it?  Recently Switzerland devalued their currency which is done just like inflation is accomplished.  Yglesias:

Earlier today the central bank of Switzerland showed that there’s a lot that can be done through the communications channel of monetary policy by simply stating that they will not allow the Swiss franc’s price in Euros to rise above a certain level, and promised to engage in “unlimited” printing of money and purchasing of foreign currency to hit the exchange rate peg. Naturally, this immediately moved currency markets because when someone with the ability to create arbitrary quantities of Swiss francs at zero cost speaks of his determination to reduce the price of Swiss francs, you listen closely.
I continue to be fascinated by the fact that lots of issues in monetary policy that are controversial when you talk about “monetary policy” become uncontroversial when the subject switches to exchange rates. Everybody knows that currency depreciation expands aggregate demand. This is what the Swiss are talking about. This is what Americans are talking about when they complain about Chinese “currency manipulation.” And everyone agrees that a determined central bank can achieve whatever exchange rate goals it sets. So despite the apparent disagreement over whether or not a determined central bank can boost aggregate demand, everyone in fact seems to agree that it can—but only if we agree to talk about exchange rates rather than “aggregate demand.”