NEW YORK (TheStreet) -- Winner of the 2008 Nobel Prize in economics and professor of economics at the Graduate Center of the City University of New York, Paul Krugman appeared on Bloomberg Tv's "What'd You Miss?" Tuesday to talk about monetary policy and inflation rates. 

"What does the Federal Reserve know when it comes to monetary policy and the economic outcome of a low growth, low rate environment?" Bloomberg TV's Scarlet Fu asked Krugman. 

"Not much," he replied. "Except that I think there's an accumulation of evidence that monetary policy is pretty ineffective." 

Although the agency can raise rates, lower rates and even set negative interest rates, Krugman says it doesn't actually do very much. 

We're basically back to where we were 18 years ago where the only way to for monetary policy to get traction is to "create the impression of a regime change" by promising "higher inflation in the long-run." 

Raising inflation targets would be his suggestion to help the economy, Krugman told Fu. 

While investors have been suggesting higher inflation targets for a while, it seems the Fed is just now talking about seriously doing so, Bloomberg Tv's Joe Weisenthal pointed out. 

"A lot of it is history," Krugman said. "There was blood, sweat, tears, and toil to get inflation down from 10% to 2%," he said. 

Since the agency had always set their ultimate goal as 2%, it's hard for them to backtrack after all the work that went into getting it down in the first place, Krugman explained. 

"It's news that anybody at the Fed is willing to even entertain the notion," he said.