There's a steady drumbeat in some quarters of Wall Street and the commentariat for the Federal Reserve to back off or at least slow down its effort to tame inflation. While some of this can be dismissed as traders talking their own books, some of it is a real concern that an anti-inflation Fed will wreck the economy.
As Harvard's Jason Furman writes in The Wall Street Journal, this is nonsense:
A growing chorus is urging the Federal Reserve to slow down lest it โbreak things.โ If you're paying attention, you should be nervous about growing financial strains in the U.S. and around the world. But the underlying U.S. inflation rate is worse and employment is stronger than they were when the Fed announced the tapering of asset purchases in November 2021. Until there has been tangible progress on inflation, not mere wishful forecasts, the Fed shouldn't let upโa process that could easily take the federal-funds rate above 5% next year.
Fed officials have reiterated they won't stop tightening monetary policy until there are consistent data showing not just that inflation has stopped rising but is indeed falling back to the Fed's two percent mandate.
That's not a message some market participants want to hear. So they refuse to believe it. After all, in the past when there was even the whiff of economic hard times in the air, central bankers found new ways to stimulate and otherwise support both the economy and financial markets. Those routine interventions made markets into a kind of junkie. Take away the good stuff, even a bit and the DTs set in.
The Fed has promised it's committed to detoxifying the system, purging it of the constant stimulation that manifests itself in inflationโฆand calls to stop the withdrawal pains.
Let's hope it stays the course, if for no other reason than to repair the damage it's done to both market resiliency and its own reputation.
The opinions expressed in this article are those of the author and do not necessarily reflect the positions ofย American Liberty News.
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3 Comments
Abolish the fed, problem solved…..
Both Powell and Yellon should be fired depends on the blood bath in November she my be gone
Abolish the Fed, useless