Richard Cookson, Columnist

The Fed's Inflation Logic Is Flawed, and Dangerous

There are plenty of holes in the arguments for keeping monetary policy loose.

June 4, 2021 at 5:30 AM UTC

Richard Cookson was head of research and fund manager at Rubicon Fund Management. Previously, he was chief investment officer at Citi Private Bank and head of asset-allocation research at HSBC.

Wage pressure.
Photographer: JIM WATSON/AFP

Provide news feedback or report an error

Site feedback:

Take our Survey

This article is for subscribers only.

With one voice the Federal Open Market Committee declaims that it’s too soon to tighten monetary policy. Thus are short rates kept at pretty much zero and long rates suppressed by dint of the U.S. central bank buying $120 billion of Treasuries and mortgage-backed securities every month.

In speech after speech every committee member declares that the sharp pick-up in U.S. inflation is temporary and that it’s just fine to have a bit of an overshoot to make up for undershooting the target before. That they’re all so consistently dovish doesn’t necessarily make them wrong. But their reasoning is poor, and dangerous.