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Opinion
Gary Shilling

The Fed's Dilemma Isn't Going Away Under Powell

Inflation and wage increases continue to undershoot expectations at the same time the central bank confronts forces pressuring it to credit tightening.
The new Fed chairman has a tough job ahead.

The new Fed chairman has a tough job ahead.

Photographer: Andrew Harrer

With the pickup in global economic growth, central banks -- except for Japan’s -- are shifting to tightening from extremely easy money, including massive quantitative easing and trivial, if not negative, short-term interest rates. The Federal Reserve has raised its target for the federal funds rate five times since December 2015 and is suggesting three more increases this year.

But the Fed is confronted with a serious dilemma: Inflation and wage increases continue to undershoot its expectations at the same time the central bank confronts forces pressuring it toward credit tightening.