Markets Fret the Fed Is Making a Big Mistake
U.S. central bankers appear unconcerned by conditions that increasingly argue for a tempering of their extremely easy monetary policy. Markets are rightly worried.
Jerome Powell is holding the line, but one of the last things the economy and markets need is a late Fed that is forced to slam its brakes.
Photographer: Alex Wong/Getty Images
A once-unthinkable notion is becoming possible: The European Central Bank may start talking about ratcheting back easy-money policies before the Federal Reserve does. Even more curious is that this would not be the result of the usual policy drivers relating to inflation, growth, financial stability and fiscal policy. Rather, it would reflect a Fed-specific duality happening now: Not only does the U.S. central bank appear to be to lagging behind developments on the ground and the emerging consensus among some other central banks, but it’s also being held hostage to a monetary framework that, while designed to capture structural change, risks being ill-suited for the Covid-disrupted world.
The ECB Governing Council, its highest policy-making entity, is scheduled to meet on June 10, a week earlier than the next meeting of the U.S. Federal Open Market Committee (the equivalent at the Fed). In the run-up to this meeting, there’s been some noise from ECB officials about the possibility of policy discussions considering the case for some reduction in the size of its asset-purchase program.